Correlation Between Capital Power and TC Energy

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

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

Diversification Opportunities for Capital Power and TC Energy

0.44

Correlation Coefficient

Capital Power  TC Energy

Very weak diversification

The 3 months correlation between Capital and TRP is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Capital Power 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 Capital Power are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Capital Power i.e., Capital Power and TC Energy go up and down completely randomly.

Pair Corralation between Capital Power and TC Energy

Assuming the 90 days trading horizon Capital Power is expected to under-perform the TC Energy. In addition to that, Capital Power is 2.64 times more volatile than TC Energy Corp. It trades about -0.07 of its total potential returns per unit of risk. TC Energy Corp is currently generating about -0.06 per unit of volatility. If you would invest  6,764  in TC Energy Corp on December 3, 2024 and sell it today you would lose (289.00) from holding TC Energy Corp or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Capital Power  vs.  TC Energy Corp

Capital Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

TC Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TC Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TC Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Capital Power and TC Energy

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

The idea behind Capital Power and TC Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.