Correlation Between Ameren Corp and TransAlta Corp
Can any of the company-specific risk be diversified away by investing in both Ameren Corp and TransAlta Corp 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 Ameren Corp and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameren Corp and TransAlta Corp, you can compare the effects of market volatilities on Ameren Corp and TransAlta Corp 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 Ameren Corp with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Corp and TransAlta Corp.
Diversification Opportunities for Ameren Corp and TransAlta Corp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ameren and TransAlta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Ameren Corp 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 Ameren Corp are associated (or correlated) with TransAlta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta Corp has no effect on the direction of Ameren Corp i.e., Ameren Corp and TransAlta Corp go up and down completely randomly.
Pair Corralation between Ameren Corp and TransAlta Corp
Considering the 90-day investment horizon Ameren Corp is expected to generate 1.03 times less return on investment than TransAlta Corp. But when comparing it to its historical volatility, Ameren Corp is 1.95 times less risky than TransAlta Corp. It trades about 0.19 of its potential returns per unit of risk. TransAlta Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,021 in TransAlta Corp on August 27, 2024 and sell it today you would earn a total of 58.00 from holding TransAlta Corp or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameren Corp vs. TransAlta Corp
Performance |
| Timeline |
| Ameren Corp |
| TransAlta Corp |
Ameren Corp and TransAlta Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameren Corp and TransAlta Corp
The main advantage of trading using opposite Ameren Corp and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Corp position performs unexpectedly, TransAlta Corp 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 TransAlta Corp will offset losses from the drop in TransAlta Corp's long position.| Ameren Corp vs. CMS Energy | Ameren Corp vs. Pinnacle West Capital | Ameren Corp vs. MGE Energy | Ameren Corp vs. Evergy, |
| TransAlta Corp vs. Pampa Energia SA | TransAlta Corp vs. Vistra Energy Corp | TransAlta Corp vs. NRG Energy | TransAlta Corp vs. Power Assets Holdings |
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 the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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