Correlation Between TransAlta Corp and Huaneng Power
Can any of the company-specific risk be diversified away by investing in both TransAlta Corp and Huaneng Power 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 Huaneng Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta Corp and Huaneng Power International, you can compare the effects of market volatilities on TransAlta Corp and Huaneng Power 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 Huaneng Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta Corp and Huaneng Power.
Diversification Opportunities for TransAlta Corp and Huaneng Power
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between TransAlta and Huaneng is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern 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 Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of TransAlta Corp i.e., TransAlta Corp and Huaneng Power go up and down completely randomly.
Pair Corralation between TransAlta Corp and Huaneng Power
Considering the 90-day investment horizon TransAlta Corp is expected to generate 39.68 times less return on investment than Huaneng Power. But when comparing it to its historical volatility, TransAlta Corp is 10.85 times less risky than Huaneng Power. It trades about 0.03 of its potential returns per unit of risk. Huaneng Power International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 29.00 in Huaneng Power International on August 24, 2024 and sell it today you would earn a total of 21.00 from holding Huaneng Power International or generate 72.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.65% |
| Values | Daily Returns |
TransAlta Corp vs. Huaneng Power International
Performance |
| Timeline |
| TransAlta Corp |
| Huaneng Power Intern |
TransAlta Corp and Huaneng Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta Corp and Huaneng Power
The main advantage of trading using opposite TransAlta Corp and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta Corp position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power's long position.| TransAlta Corp vs. Pampa Energia SA | TransAlta Corp vs. Vistra Energy Corp | TransAlta Corp vs. NRG Energy | TransAlta Corp vs. Power Assets Holdings |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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