Correlation Between Algonquin Power and NEW MILLENNIUM

Can any of the company-specific risk be diversified away by investing in both Algonquin Power and NEW MILLENNIUM 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 Algonquin Power and NEW MILLENNIUM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algonquin Power Utilities and NEW MILLENNIUM IRON, you can compare the effects of market volatilities on Algonquin Power and NEW MILLENNIUM 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 Algonquin Power with a short position of NEW MILLENNIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and NEW MILLENNIUM.

Diversification Opportunities for Algonquin Power and NEW MILLENNIUM

0.58

Correlation Coefficient

Algonquin Power  NEW MILLENNIUM

Very weak diversification

The 3 months correlation between Algonquin and NEW is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of Algonquin Power i.e., Algonquin Power and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between Algonquin Power and NEW MILLENNIUM

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the NEW MILLENNIUM. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.25 times less risky than NEW MILLENNIUM. The stock trades about -0.02 of its potential returns per unit of risk. The NEW MILLENNIUM IRON is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  505.00  in NEW MILLENNIUM IRON on March 28, 2025 and sell it today you would earn a total of  300.00  from holding NEW MILLENNIUM IRON or generate 59.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Algonquin Power Utilities  vs.  NEW MILLENNIUM IRON

Algonquin Power Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, NEW MILLENNIUM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and NEW MILLENNIUM

The main advantage of trading using opposite Algonquin Power and NEW MILLENNIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, NEW MILLENNIUM 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 NEW MILLENNIUM will offset losses from the drop in NEW MILLENNIUM's long position.

The idea behind Algonquin Power Utilities and NEW MILLENNIUM IRON 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.

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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 the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.