Correlation Between Alaska Energy and Transat AT

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

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

Diversification Opportunities for Alaska Energy and Transat AT

-0.37

Correlation Coefficient

Alaska Energy  Transat AT

Very good diversification

The 3 months correlation between Alaska and Transat is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Energy Metals and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and Alaska 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 Alaska Energy Metals are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of Alaska Energy i.e., Alaska Energy and Transat AT go up and down completely randomly.

Pair Corralation between Alaska Energy and Transat AT

Assuming the 90 days trading horizon Alaska Energy Metals is expected to under-perform the Transat AT. In addition to that, Alaska Energy is 1.43 times more volatile than Transat AT. It trades about -0.09 of its total potential returns per unit of risk. Transat AT is currently generating about 0.09 per unit of volatility. If you would invest  173.00  in Transat AT on October 7, 2024 and sell it today you would earn a total of  25.00  from holding Transat AT or generate 14.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alaska Energy Metals  vs.  Transat AT

Alaska Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alaska Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Transat AT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Transat AT displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Energy and Transat AT

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

The idea behind Alaska Energy Metals and Transat AT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.