Correlation Between Talen Energy and SSE PLC
Can any of the company-specific risk be diversified away by investing in both Talen Energy and SSE PLC 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 SSE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talen Energy and SSE PLC ADR, you can compare the effects of market volatilities on Talen Energy and SSE PLC 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 SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and SSE PLC.
Diversification Opportunities for Talen Energy and SSE PLC
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Talen and SSE is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR 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 SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of Talen Energy i.e., Talen Energy and SSE PLC go up and down completely randomly.
Pair Corralation between Talen Energy and SSE PLC
Considering the 90-day investment horizon Talen Energy is expected to generate 1.85 times more return on investment than SSE PLC. However, Talen Energy is 1.85 times more volatile than SSE PLC ADR. It trades about 0.18 of its potential returns per unit of risk. SSE PLC ADR is currently generating about 0.0 per unit of risk. If you would invest 4,615 in Talen Energy on September 12, 2024 and sell it today you would earn a total of 15,751 from holding Talen Energy or generate 341.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talen Energy vs. SSE PLC ADR
Performance |
| Timeline |
| Talen Energy |
| SSE PLC ADR |
Talen Energy and SSE PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talen Energy and SSE PLC
The main advantage of trading using opposite Talen Energy and SSE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talen Energy position performs unexpectedly, SSE PLC 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 SSE PLC will offset losses from the drop in SSE PLC's long position.| Talen Energy vs. Grupo Aeroportuario del | Talen Energy vs. Alaska Air Group | Talen Energy vs. AerSale Corp | Talen Energy vs. SunLink Health Systems |
| SSE PLC vs. ENEL Societa per | SSE PLC vs. Allete Inc | SSE PLC vs. Companhia Energetica de | SSE PLC vs. The AES |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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