Correlation Between ECHO INVESTMENT and TransAlta

Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and TransAlta 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 ECHO INVESTMENT and TransAlta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECHO INVESTMENT ZY and TransAlta, you can compare the effects of market volatilities on ECHO INVESTMENT and TransAlta 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 ECHO INVESTMENT with a short position of TransAlta. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and TransAlta.

Diversification Opportunities for ECHO INVESTMENT and TransAlta

0.71

Correlation Coefficient

ECHO INVESTMENT  TransAlta

Poor diversification

The 3 months correlation between ECHO and TransAlta is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and TransAlta go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and TransAlta

Assuming the 90 days horizon ECHO INVESTMENT is expected to generate 5.13 times less return on investment than TransAlta. But when comparing it to its historical volatility, ECHO INVESTMENT ZY is 1.28 times less risky than TransAlta. It trades about 0.07 of its potential returns per unit of risk. TransAlta is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  807.00  in TransAlta on September 20, 2024 and sell it today you would earn a total of  520.00  from holding TransAlta or generate 64.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

ECHO INVESTMENT ZY  vs.  TransAlta

ECHO INVESTMENT ZY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TransAlta

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TransAlta are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TransAlta reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECHO INVESTMENT and TransAlta

The main advantage of trading using opposite ECHO INVESTMENT and TransAlta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT position performs unexpectedly, TransAlta 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 TransAlta will offset losses from the drop in TransAlta's long position.

The idea behind ECHO INVESTMENT ZY and TransAlta pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.