Correlation Between WT OFFSHORE and TransAlta

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

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

Diversification Opportunities for WT OFFSHORE and TransAlta

-0.64

Correlation Coefficient

WT OFFSHORE  TransAlta

Excellent diversification

The 3 months correlation between UWV and TransAlta is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding WT OFFSHORE and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta and WT OFFSHORE 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 WT OFFSHORE 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 WT OFFSHORE i.e., WT OFFSHORE and TransAlta go up and down completely randomly.

Pair Corralation between WT OFFSHORE and TransAlta

Assuming the 90 days trading horizon WT OFFSHORE is expected to under-perform the TransAlta. In addition to that, WT OFFSHORE is 1.4 times more volatile than TransAlta. It trades about -0.07 of its total potential returns per unit of risk. TransAlta is currently generating about 0.29 per unit of volatility. 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 Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

WT OFFSHORE  vs.  TransAlta

WT OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 WT OFFSHORE and TransAlta

The main advantage of trading using opposite WT OFFSHORE and TransAlta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT OFFSHORE 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 WT OFFSHORE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.