Correlation Between Datang International and TransAlta Corp

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Can any of the company-specific risk be diversified away by investing in both Datang International 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 Datang International and TransAlta Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datang International Power and TransAlta Corp, you can compare the effects of market volatilities on Datang International 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 Datang International with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and TransAlta Corp.

Diversification Opportunities for Datang International and TransAlta Corp

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Datang and TransAlta is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Datang International 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 Datang International Power 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 Datang International i.e., Datang International and TransAlta Corp go up and down completely randomly.

Pair Corralation between Datang International and TransAlta Corp

If you would invest  899.00  in TransAlta Corp on September 11, 2024 and sell it today you would earn a total of  404.00  from holding TransAlta Corp or generate 44.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy1.59%
ValuesDaily Returns

Datang International Power  vs.  TransAlta Corp

 Performance 
       Timeline  
Datang International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
TransAlta Corp 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in TransAlta Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, TransAlta Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Datang International and TransAlta Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Datang International and TransAlta Corp

The main advantage of trading using opposite Datang International and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International 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 Datang International Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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