Correlation Between Clearway Energy and TransAlta Renewables

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

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

Diversification Opportunities for Clearway Energy and TransAlta Renewables

0.31

Correlation Coefficient

Clearway Energy  TransAlta Renewables

Weak diversification

The 3 months correlation between Clearway and TransAlta is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy Class and TransAlta Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Renewables and Clearway 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 Clearway Energy Class are associated (or correlated) with TransAlta Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta Renewables has no effect on the direction of Clearway Energy i.e., Clearway Energy and TransAlta Renewables go up and down completely randomly.

Pair Corralation between Clearway Energy and TransAlta Renewables

If you would invest  2,808  in Clearway Energy Class on August 31, 2024 and sell it today you would earn a total of  142.00  from holding Clearway Energy Class or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Clearway Energy Class  vs.  TransAlta Renewables

Clearway Energy Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

TransAlta Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransAlta Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TransAlta Renewables is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Clearway Energy and TransAlta Renewables

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

The idea behind Clearway Energy Class and TransAlta Renewables 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.