Correlation Between TransAlta Corp and Brookfield Renewable
Can any of the company-specific risk be diversified away by investing in both TransAlta Corp and Brookfield Renewable 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 Corp and Brookfield Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta Corp and Brookfield Renewable Partners, you can compare the effects of market volatilities on TransAlta Corp and Brookfield Renewable 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 Corp with a short position of Brookfield Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta Corp and Brookfield Renewable.
Diversification Opportunities for TransAlta Corp and Brookfield Renewable
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between TransAlta and Brookfield is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp and Brookfield Renewable Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and TransAlta Corp 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 Corp are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of TransAlta Corp i.e., TransAlta Corp and Brookfield Renewable go up and down completely randomly.
Pair Corralation between TransAlta Corp and Brookfield Renewable
Assuming the 90 days horizon TransAlta Corp is expected to generate 2.06 times more return on investment than Brookfield Renewable. However, TransAlta Corp is 2.06 times more volatile than Brookfield Renewable Partners. It trades about 0.09 of its potential returns per unit of risk. Brookfield Renewable Partners is currently generating about 0.13 per unit of risk. If you would invest 1,082 in TransAlta Corp on September 2, 2024 and sell it today you would earn a total of 505.00 from holding TransAlta Corp or generate 46.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TransAlta Corp vs. Brookfield Renewable Partners
Performance |
| Timeline |
| TransAlta Corp |
| Brookfield Renewable |
TransAlta Corp and Brookfield Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta Corp and Brookfield Renewable
The main advantage of trading using opposite TransAlta Corp and Brookfield Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta Corp position performs unexpectedly, Brookfield Renewable 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 Brookfield Renewable will offset losses from the drop in Brookfield Renewable's long position.| TransAlta Corp vs. Emera Inc | TransAlta Corp vs. TC Energy Corp | TransAlta Corp vs. Imperial Oil | TransAlta Corp vs. Sun Life Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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