Correlation Between Talen Energy and Maxim Power
Can any of the company-specific risk be diversified away by investing in both Talen Energy and Maxim 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 Talen Energy and Maxim Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talen Energy and Maxim Power Corp, you can compare the effects of market volatilities on Talen Energy and Maxim 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 Talen Energy with a short position of Maxim Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and Maxim Power.
Diversification Opportunities for Talen Energy and Maxim Power
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Talen and Maxim is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Talen Energy 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 Talen Energy are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Talen Energy i.e., Talen Energy and Maxim Power go up and down completely randomly.
Pair Corralation between Talen Energy and Maxim Power
Considering the 90-day investment horizon Talen Energy is expected to generate 1.16 times less return on investment than Maxim Power. In addition to that, Talen Energy is 1.14 times more volatile than Maxim Power Corp. It trades about 0.18 of its total potential returns per unit of risk. Maxim Power Corp is currently generating about 0.24 per unit of volatility. If you would invest 296.00 in Maxim Power Corp on August 27, 2024 and sell it today you would earn a total of 54.00 from holding Maxim Power Corp or generate 18.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talen Energy vs. Maxim Power Corp
Performance |
| Timeline |
| Talen Energy |
| Maxim Power Corp |
Talen Energy and Maxim Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talen Energy and Maxim Power
The main advantage of trading using opposite Talen Energy and Maxim Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talen Energy position performs unexpectedly, Maxim 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 Maxim Power will offset losses from the drop in Maxim Power's long position.| Talen Energy vs. Afya | Talen Energy vs. Relx PLC ADR | Talen Energy vs. 51Talk Online Education | Talen Energy vs. WEBTOON Entertainment Common |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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