Correlation Between TransAlta Corp and Transalta
Can any of the company-specific risk be diversified away by investing in both TransAlta Corp and Transalta 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 Transalta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta Corp and Transalta A Cum, you can compare the effects of market volatilities on TransAlta Corp and Transalta 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 Transalta. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta Corp and Transalta.
Diversification Opportunities for TransAlta Corp and Transalta
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TransAlta and Transalta is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp and Transalta A Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transalta A Cum 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 Transalta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transalta A Cum has no effect on the direction of TransAlta Corp i.e., TransAlta Corp and Transalta go up and down completely randomly.
Pair Corralation between TransAlta Corp and Transalta
Assuming the 90 days horizon TransAlta Corp is expected to generate 1.82 times more return on investment than Transalta. However, TransAlta Corp is 1.82 times more volatile than Transalta A Cum. It trades about 0.11 of its potential returns per unit of risk. Transalta A Cum is currently generating about 0.1 per unit of risk. If you would invest 1,125 in TransAlta Corp on September 14, 2024 and sell it today you would earn a total of 745.00 from holding TransAlta Corp or generate 66.22% 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. Transalta A Cum
Performance |
| Timeline |
| TransAlta Corp |
| Transalta A Cum |
TransAlta Corp and Transalta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta Corp and Transalta
The main advantage of trading using opposite TransAlta Corp and Transalta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta Corp position performs unexpectedly, Transalta 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 will offset losses from the drop in Transalta'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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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