Correlation Between TransAlta and CENTRICA ADR
Can any of the company-specific risk be diversified away by investing in both TransAlta and CENTRICA ADR 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 CENTRICA ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TransAlta and CENTRICA ADR NEW, you can compare the effects of market volatilities on TransAlta and CENTRICA ADR 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 CENTRICA ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransAlta and CENTRICA ADR.
Diversification Opportunities for TransAlta and CENTRICA ADR
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TransAlta and CENTRICA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta and CENTRICA ADR NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTRICA ADR NEW 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 CENTRICA ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTRICA ADR NEW has no effect on the direction of TransAlta i.e., TransAlta and CENTRICA ADR go up and down completely randomly.
Pair Corralation between TransAlta and CENTRICA ADR
Assuming the 90 days horizon TransAlta is expected to generate 2.41 times more return on investment than CENTRICA ADR. However, TransAlta is 2.41 times more volatile than CENTRICA ADR NEW. It trades about 0.22 of its potential returns per unit of risk. CENTRICA ADR NEW is currently generating about 0.34 per unit of risk. If you would invest 922.00 in TransAlta on September 3, 2024 and sell it today you would earn a total of 124.00 from holding TransAlta or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TransAlta vs. CENTRICA ADR NEW
Performance |
| Timeline |
| TransAlta |
| CENTRICA ADR NEW |
TransAlta and CENTRICA ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TransAlta and CENTRICA ADR
The main advantage of trading using opposite TransAlta and CENTRICA ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransAlta position performs unexpectedly, CENTRICA ADR 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 CENTRICA ADR will offset losses from the drop in CENTRICA ADR's long position.| TransAlta vs. CENTRICA ADR NEW | TransAlta vs. Superior Plus Corp | TransAlta vs. NMI Holdings | TransAlta vs. Origin Agritech |
| CENTRICA ADR vs. CeoTronics AG | CENTRICA ADR vs. MOLSON RS BEVERAGE | CENTRICA ADR vs. EPSILON HEALTHCARE LTD | CENTRICA ADR vs. Collins Foods Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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