Correlation Between NRG Energy and TransAlta Corp
Can any of the company-specific risk be diversified away by investing in both NRG Energy 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 NRG Energy and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and TransAlta Corp, you can compare the effects of market volatilities on NRG Energy 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 NRG Energy with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and TransAlta Corp.
Diversification Opportunities for NRG Energy and TransAlta Corp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NRG and TransAlta is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and NRG 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 NRG Energy 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 NRG Energy i.e., NRG Energy and TransAlta Corp go up and down completely randomly.
Pair Corralation between NRG Energy and TransAlta Corp
Considering the 90-day investment horizon NRG Energy is expected to generate 2.49 times less return on investment than TransAlta Corp. In addition to that, NRG Energy is 1.09 times more volatile than TransAlta Corp. It trades about 0.06 of its total potential returns per unit of risk. TransAlta Corp is currently generating about 0.18 per unit of volatility. If you would invest 703.00 in TransAlta Corp on August 24, 2024 and sell it today you would earn a total of 389.00 from holding TransAlta Corp or generate 55.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. TransAlta Corp
Performance |
| Timeline |
| NRG Energy |
| TransAlta Corp |
NRG Energy and TransAlta Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and TransAlta Corp
The main advantage of trading using opposite NRG Energy and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy 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.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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