Correlation Between Contact Energy and TransAlta
Can any of the company-specific risk be diversified away by investing in both Contact Energy and TransAlta 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 Contact Energy and TransAlta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Contact Energy Limited and TransAlta, you can compare the effects of market volatilities on Contact Energy and TransAlta 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 Contact Energy with a short position of TransAlta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contact Energy and TransAlta.
Diversification Opportunities for Contact Energy and TransAlta
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Contact and TransAlta is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Contact Energy Limited and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta and Contact Energy 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 Contact Energy Limited are associated (or correlated) with TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of Contact Energy i.e., Contact Energy and TransAlta go up and down completely randomly.
Pair Corralation between Contact Energy and TransAlta
Assuming the 90 days horizon Contact Energy is expected to generate 1.29 times less return on investment than TransAlta. But when comparing it to its historical volatility, Contact Energy Limited is 1.28 times less risky than TransAlta. It trades about 0.03 of its potential returns per unit of risk. TransAlta is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 829.00 in TransAlta on August 29, 2024 and sell it today you would earn a total of 184.00 from holding TransAlta or generate 22.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Contact Energy Limited vs. TransAlta
Performance |
| Timeline |
| Contact Energy |
| TransAlta |
Contact Energy and TransAlta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Contact Energy and TransAlta
The main advantage of trading using opposite Contact Energy and TransAlta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contact Energy position performs unexpectedly, TransAlta 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 will offset losses from the drop in TransAlta's long position.| Contact Energy vs. CN YANGTPWR GDR | Contact Energy vs. Superior Plus Corp | Contact Energy vs. SIVERS SEMICONDUCTORS AB | Contact Energy vs. Talanx AG |
| TransAlta vs. CN YANGTPWR GDR | TransAlta vs. Superior Plus Corp | TransAlta vs. SIVERS SEMICONDUCTORS AB | TransAlta vs. Talanx AG |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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