diff --git a/test/algorithm_test/AverageAlgorithm_test.py b/test/algorithm_test/AverageAlgorithm_test.py
new file mode 100644
index 0000000000000000000000000000000000000000..1600c48da288ff7d2fb860d7745578fb797522c4
--- /dev/null
+++ b/test/algorithm_test/AverageAlgorithm_test.py
@@ -0,0 +1,105 @@
+from geomagio.algorithm import AverageAlgorithm as avg
+from obspy.core.stream import Stream
+from ..StreamConverter_test import __create_trace
+from obspy.core import UTCDateTime
+from nose.tools import assert_equals
+import numpy as np
+from numpy.testing import assert_array_equal
+# from nose.tools import assert_almost_equals
+
+
+def test_process():
+    """AverageAlgorithm_test.test_process()
+    confirms that the output of the algorithm is the average of three
+    different stations.
+
+    """
+
+    dat1 = np.array(np.ones(5))
+    dat2 = np.ones(5) * 5
+    dat3 = np.ones(5) * 3
+    final_data = np.ones(5) * 3
+    timeseries = Stream()
+    timeseries += __create_trace('H', dat1)
+    timeseries[0].stats.station = 'HON'
+    timeseries[0].stats.samples = 5
+    timeseries[0].stats.data_type = 'variation'
+    timeseries[0].stats.data_interval = 'minute'
+    timeseries += __create_trace('H', dat2)
+    timeseries[1].stats.station = 'GUA'
+    timeseries += __create_trace('H', dat3)
+    timeseries[2].stats.station = 'SJG'
+    a = avg(('HON', 'GUA', 'SJG'), 'H')
+    outstream = a.process(timeseries)
+    # Ensure the average of two
+    np.testing.assert_array_equal(outstream[0].data, final_data)
+
+
+def test_gaps():
+    """AverageAlgorithm_test.test_gaps()
+    checks that gaps in data are not taken into account in
+    the averaging process.
+
+    """
+
+    trace1 = __create_trace('H', [1, 1, np.nan, np.nan, 1, 1])
+    # set time of first sample
+    trace1.stats.starttime = UTCDateTime('2015-01-01T00:00:00Z')
+    # set sample rate to 1 minute
+    trace1.stats.delta = 60
+    # set station code
+    trace1.stats.station = 'HON'
+    trace1.stats.data_type = 'variation'
+    trace1.stats.data_interval = 'minute'
+
+    trace2 = __create_trace('H', [1, 1, 1, 1, 1, 1])
+    # set time of first sample
+    trace2.stats.starttime = UTCDateTime('2015-01-01T00:00:00Z')
+    # set sample rate to 1 minute
+    trace2.stats.delta = 60
+    # set station code
+    trace2.stats.station = 'SJG'
+
+    timeseries = Stream()
+    timeseries += trace1
+    timeseries += trace2
+    alg = avg(('HON', 'SJG'), 'H')
+    outstream = alg.process(timeseries)
+
+    assert_array_equal(outstream[0].data, [1, 1, np.nan, np.nan, 1, 1])
+
+
+def test_metadata():
+    """AverageAlgorithm_test.test_metadata()
+    confirms the correct metadata is set for the
+    resulting averaged data stream.
+
+    """
+
+    trace1 = __create_trace('H', [3, 3, 3, 3, 3, 3])
+    # set time of first sample
+    trace1.stats.starttime = UTCDateTime('2015-01-01T00:00:00Z')
+    # set sample rate to 1 minute
+    trace1.stats.delta = 60
+    # set station code
+    trace1.stats.station = 'HON'
+    trace1.stats.data_type = 'variation'
+    trace1.stats.data_interval = 'minute'
+
+    trace2 = __create_trace('H', [1, 1, 1, 1, 1, 1])
+    # set time of first sample
+    trace2.stats.starttime = UTCDateTime('2015-01-01T00:00:00Z')
+    # set sample rate to 1 minute
+    trace2.stats.delta = 60
+    # set station code
+    trace2.stats.station = 'SJG'
+
+    timeseries = Stream()
+    timeseries += trace1
+    timeseries += trace2
+
+    alg = avg(('HON', 'SJG'), 'Hdt')
+    outstream = alg.process(timeseries)
+
+    assert_equals(outstream[0].stats.station, 'USGS')
+    assert_equals(outstream[0].stats.channel, 'Hdt')