Correlation Between Maxim Power and TransAlta Corp
Can any of the company-specific risk be diversified away by investing in both Maxim Power 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 Maxim Power and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maxim Power Corp and TransAlta Corp, you can compare the effects of market volatilities on Maxim Power 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 Maxim Power with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maxim Power and TransAlta Corp.
Diversification Opportunities for Maxim Power and TransAlta Corp
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Maxim and TransAlta is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Maxim Power Corp and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Maxim 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 Maxim Power 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 Maxim Power i.e., Maxim Power and TransAlta Corp go up and down completely randomly.
Pair Corralation between Maxim Power and TransAlta Corp
Assuming the 90 days horizon Maxim Power Corp is expected to generate 1.25 times more return on investment than TransAlta Corp. However, Maxim Power is 1.25 times more volatile than TransAlta Corp. It trades about 0.04 of its potential returns per unit of risk. TransAlta Corp is currently generating about 0.03 per unit of risk. If you would invest 249.00 in Maxim Power Corp on August 27, 2024 and sell it today you would earn a total of 101.00 from holding Maxim Power Corp or generate 40.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maxim Power Corp vs. TransAlta Corp
Performance |
| Timeline |
| Maxim Power Corp |
| TransAlta Corp |
Maxim Power and TransAlta Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maxim Power and TransAlta Corp
The main advantage of trading using opposite Maxim Power and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maxim Power 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.The idea behind Maxim Power Corp and TransAlta Corp 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.| 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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