Correlation Between AGL Energy and TransAlta Corp
Can any of the company-specific risk be diversified away by investing in both AGL Energy 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 AGL Energy and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGL Energy and TransAlta Corp, you can compare the effects of market volatilities on AGL Energy 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 AGL Energy with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGL Energy and TransAlta Corp.
Diversification Opportunities for AGL Energy and TransAlta Corp
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AGL and TransAlta is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding AGL Energy and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and AGL 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 AGL Energy 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 AGL Energy i.e., AGL Energy and TransAlta Corp go up and down completely randomly.
Pair Corralation between AGL Energy and TransAlta Corp
Assuming the 90 days horizon AGL Energy is expected to generate 2.55 times less return on investment than TransAlta Corp. In addition to that, AGL Energy is 1.36 times more volatile than TransAlta Corp. It trades about 0.03 of its total potential returns per unit of risk. TransAlta Corp is currently generating about 0.11 per unit of volatility. If you would invest 748.00 in TransAlta Corp on September 7, 2024 and sell it today you would earn a total of 531.00 from holding TransAlta Corp or generate 70.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.6% |
Values | Daily Returns |
AGL Energy vs. TransAlta Corp
Performance |
Timeline |
AGL Energy |
TransAlta Corp |
AGL Energy and TransAlta Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AGL Energy and TransAlta Corp
The main advantage of trading using opposite AGL Energy and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGL Energy 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.AGL Energy vs. NRG Energy | AGL Energy vs. TransAlta Corp | AGL Energy vs. Kenon Holdings | AGL Energy vs. Pampa Energia SA |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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