Correlation Between Transalta and Capstone Infrastructure
Can any of the company-specific risk be diversified away by investing in both Transalta and Capstone Infrastructure 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 Transalta and Capstone Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transalta A Cum and Capstone Infrastructure Corp, you can compare the effects of market volatilities on Transalta and Capstone Infrastructure 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 Transalta with a short position of Capstone Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transalta and Capstone Infrastructure.
Diversification Opportunities for Transalta and Capstone Infrastructure
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transalta and Capstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Transalta A Cum and Capstone Infrastructure Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Infrastructure and Transalta 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 Transalta A Cum are associated (or correlated) with Capstone Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Infrastructure has no effect on the direction of Transalta i.e., Transalta and Capstone Infrastructure go up and down completely randomly.
Pair Corralation between Transalta and Capstone Infrastructure
Assuming the 90 days trading horizon Transalta A Cum is expected to generate 0.67 times more return on investment than Capstone Infrastructure. However, Transalta A Cum is 1.5 times less risky than Capstone Infrastructure. It trades about 0.25 of its potential returns per unit of risk. Capstone Infrastructure Corp is currently generating about 0.07 per unit of risk. If you would invest 1,548 in Transalta A Cum on November 3, 2024 and sell it today you would earn a total of 52.00 from holding Transalta A Cum or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transalta A Cum vs. Capstone Infrastructure Corp
Performance |
| Timeline |
| Transalta A Cum |
| Capstone Infrastructure |
Transalta and Capstone Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transalta and Capstone Infrastructure
The main advantage of trading using opposite Transalta and Capstone Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transalta position performs unexpectedly, Capstone Infrastructure 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 Capstone Infrastructure will offset losses from the drop in Capstone Infrastructure's long position.| Transalta vs. Brookfield Renewable Partners | Transalta vs. TransAlta Corp | Transalta vs. Capstone Infrastructure Corp | Transalta vs. Innergex Renewable Energy |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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