Correlation Between TransAlta Corp and Imperial Oil
Can any of the company-specific risk be diversified away by investing in both TransAlta Corp and Imperial Oil 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 Imperial Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta Corp and Imperial Oil, you can compare the effects of market volatilities on TransAlta Corp and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta Corp and Imperial Oil.
Diversification Opportunities for TransAlta Corp and Imperial Oil
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TransAlta and Imperial is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of TransAlta Corp i.e., TransAlta Corp and Imperial Oil go up and down completely randomly.
Pair Corralation between TransAlta Corp and Imperial Oil
Assuming the 90 days horizon TransAlta Corp is expected to generate 1.16 times more return on investment than Imperial Oil. However, TransAlta Corp is 1.16 times more volatile than Imperial Oil. It trades about 0.11 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.1 per unit of risk. If you would invest 1,023 in TransAlta Corp on September 4, 2024 and sell it today you would earn a total of 598.00 from holding TransAlta Corp or generate 58.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TransAlta Corp vs. Imperial Oil
Performance |
| Timeline |
| TransAlta Corp |
| Imperial Oil |
TransAlta Corp and Imperial Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta Corp and Imperial Oil
The main advantage of trading using opposite TransAlta Corp and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta Corp position performs unexpectedly, Imperial Oil 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 Imperial Oil will offset losses from the drop in Imperial Oil'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 |
| Imperial Oil vs. Canadian Natural Resources | Imperial Oil vs. Cenovus Energy | Imperial Oil vs. TC Energy Corp | Imperial Oil vs. Suncor Energy |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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