Correlation Between Apple and Algonquin Power

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Can any of the company-specific risk be diversified away by investing in both Apple and Algonquin Power at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Apple and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Algonquin Power Utilities, you can compare the effects of market volatilities on Apple and Algonquin Power and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Apple with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Algonquin Power.

Diversification Opportunities for Apple and Algonquin Power

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Apple and Algonquin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Apple is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Apple Inc are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Apple i.e., Apple and Algonquin Power go up and down completely randomly.

Pair Corralation between Apple and Algonquin Power

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Algonquin Power. In addition to that, Apple is 2.4 times more volatile than Algonquin Power Utilities. It trades about -0.23 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.16 per unit of volatility. If you would invest  2,371  in Algonquin Power Utilities on July 5, 2022 and sell it today you would earn a total of  75.00  from holding Algonquin Power Utilities or generate 3.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Algonquin Power Utilities

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
0 of 100
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Algonquin Power Utilities 
Algonquin Performance
0 of 100
Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Algonquin Price Channel

Apple and Algonquin Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Algonquin Power

The main advantage of trading using opposite Apple and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Algonquin Power can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Algonquin Power will offset losses from the drop in Algonquin Power's long position.
Apple vs. Amazon Inc
The idea behind Apple Inc and Algonquin Power Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Algonquin Power vs. Microsoft Corp
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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