Correlation Between Engie SA and TransAlta Corp
Can any of the company-specific risk be diversified away by investing in both Engie SA 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 Engie SA and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engie SA ADR and TransAlta Corp, you can compare the effects of market volatilities on Engie SA 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 Engie SA with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie SA and TransAlta Corp.
Diversification Opportunities for Engie SA and TransAlta Corp
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Engie and TransAlta is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA ADR and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Engie SA 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 Engie SA ADR 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 Engie SA i.e., Engie SA and TransAlta Corp go up and down completely randomly.
Pair Corralation between Engie SA and TransAlta Corp
Assuming the 90 days horizon Engie SA ADR is expected to generate 0.72 times more return on investment than TransAlta Corp. However, Engie SA ADR is 1.39 times less risky than TransAlta Corp. It trades about 0.05 of its potential returns per unit of risk. TransAlta Corp is currently generating about 0.04 per unit of risk. If you would invest 1,171 in Engie SA ADR on August 31, 2024 and sell it today you would earn a total of 403.00 from holding Engie SA ADR or generate 34.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engie SA ADR vs. TransAlta Corp
Performance |
| Timeline |
| Engie SA ADR |
| TransAlta Corp |
Engie SA and TransAlta Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engie SA and TransAlta Corp
The main advantage of trading using opposite Engie SA and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie SA 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.| Engie SA vs. Nextera Energy | Engie SA vs. Consumers Energy | Engie SA vs. Duke Energy | Engie SA vs. Centrais Electricas Brasileiras |
| TransAlta Corp vs. Vistra Energy Corp | TransAlta Corp vs. Pampa Energia SA | TransAlta Corp vs. NRG Energy | TransAlta Corp vs. AGL Energy |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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