Correlation Between TransAlta and Contact Energy
Can any of the company-specific risk be diversified away by investing in both TransAlta and Contact Energy 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 and Contact Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta and Contact Energy Limited, you can compare the effects of market volatilities on TransAlta and Contact Energy 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 with a short position of Contact Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta and Contact Energy.
Diversification Opportunities for TransAlta and Contact Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TransAlta and Contact is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta and Contact Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Energy and TransAlta 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 are associated (or correlated) with Contact Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Energy has no effect on the direction of TransAlta i.e., TransAlta and Contact Energy go up and down completely randomly.
Pair Corralation between TransAlta and Contact Energy
Assuming the 90 days horizon TransAlta is expected to under-perform the Contact Energy. In addition to that, TransAlta is 2.51 times more volatile than Contact Energy Limited. It trades about -0.23 of its total potential returns per unit of risk. Contact Energy Limited is currently generating about 0.15 per unit of volatility. If you would invest 492.00 in Contact Energy Limited on November 2, 2024 and sell it today you would earn a total of 28.00 from holding Contact Energy Limited or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TransAlta vs. Contact Energy Limited
Performance |
| Timeline |
| TransAlta |
| Contact Energy |
TransAlta and Contact Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta and Contact Energy
The main advantage of trading using opposite TransAlta and Contact Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta position performs unexpectedly, Contact Energy 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 Contact Energy will offset losses from the drop in Contact Energy's long position.| TransAlta vs. CN YANGTPWR GDR | TransAlta vs. Siemens Energy AG | TransAlta vs. Vistra Corp | TransAlta vs. Datang International Power |
| Contact Energy vs. Shin Etsu Chemical Co | Contact Energy vs. TIANDE CHEMICAL | Contact Energy vs. TRI CHEMICAL LABORATINC | Contact Energy vs. Siamgas And Petrochemicals |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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