Correlation Between TransAlta Corp and Capstone Infrastructure
Can any of the company-specific risk be diversified away by investing in both TransAlta Corp 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 Corp 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 Corp and Capstone Infrastructure Corp, you can compare the effects of market volatilities on TransAlta Corp 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 Corp with a short position of Capstone Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta Corp and Capstone Infrastructure.
Diversification Opportunities for TransAlta Corp and Capstone Infrastructure
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TransAlta and Capstone is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp 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 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 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 Corp i.e., TransAlta Corp and Capstone Infrastructure go up and down completely randomly.
Pair Corralation between TransAlta Corp and Capstone Infrastructure
Assuming the 90 days horizon TransAlta Corp is expected to generate 1.93 times more return on investment than Capstone Infrastructure. However, TransAlta Corp is 1.93 times more volatile than Capstone Infrastructure Corp. It trades about 0.07 of its potential returns per unit of risk. Capstone Infrastructure Corp is currently generating about 0.06 per unit of risk. If you would invest 1,239 in TransAlta Corp on September 12, 2024 and sell it today you would earn a total of 618.00 from holding TransAlta Corp or generate 49.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TransAlta Corp vs. Capstone Infrastructure Corp
Performance |
| Timeline |
| TransAlta Corp |
| Capstone Infrastructure |
TransAlta Corp and Capstone Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta Corp and Capstone Infrastructure
The main advantage of trading using opposite TransAlta Corp and Capstone Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta Corp 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 Corp vs. Emera Inc | TransAlta Corp vs. TC Energy Corp | TransAlta Corp vs. Imperial Oil | TransAlta Corp vs. Sun Life Financial |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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