Correlation Between Partners Value and TransAlta Corp

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

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

Diversification Opportunities for Partners Value and TransAlta Corp

0.77

Correlation Coefficient

Partners Value  TransAlta Corp

Poor diversification

The 3 months correlation between Partners and TransAlta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Partners Value Investments and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Partners Value 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 Partners Value Investments are associated (or correlated) with TransAlta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta Corp has no effect on the direction of Partners Value i.e., Partners Value and TransAlta Corp go up and down completely randomly.

Pair Corralation between Partners Value and TransAlta Corp

Assuming the 90 days trading horizon Partners Value Investments is expected to generate 1.85 times more return on investment than TransAlta Corp. However, Partners Value is 1.85 times more volatile than TransAlta Corp. It trades about 0.19 of its potential returns per unit of risk. TransAlta Corp is currently generating about 0.26 per unit of risk. If you would invest  9,500  in Partners Value Investments on September 4, 2024 and sell it today you would earn a total of  4,500  from holding Partners Value Investments or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Partners Value Investments  vs.  TransAlta Corp

Partners Value Inves

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Partners Value Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Partners Value sustained solid returns over the last few months and may actually be approaching a breakup point.

TransAlta Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TransAlta Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TransAlta Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Partners Value and TransAlta Corp

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

The idea behind Partners Value Investments and TransAlta Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.