Correlation Between Maxim Power and TransAlta Corp

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

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

Diversification Opportunities for Maxim Power and TransAlta Corp

0.69

Correlation Coefficient

Maxim Power  TransAlta Corp

Poor diversification

The 3 months correlation between Maxim and TransAlta is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Maxim Power Corp and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and Maxim 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 Maxim Power Corp 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 Maxim Power i.e., Maxim Power and TransAlta Corp go up and down completely randomly.

Pair Corralation between Maxim Power and TransAlta Corp

Assuming the 90 days trading horizon Maxim Power Corp is expected to generate 0.69 times more return on investment than TransAlta Corp. However, Maxim Power Corp is 1.45 times less risky than TransAlta Corp. It trades about -0.19 of its potential returns per unit of risk. TransAlta Corp is currently generating about -0.16 per unit of risk. If you would invest  599.00  in Maxim Power Corp on December 30, 2024 and sell it today you would lose (163.00) from holding Maxim Power Corp or give up 27.21% of portfolio value over 90 days.

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

Maxim Power Corp  vs.  TransAlta Corp

Maxim Power Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maxim Power Corp 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 technical and fundamental 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.

TransAlta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TransAlta Corp 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.

Pair Trading with Maxim Power and TransAlta Corp

The main advantage of trading using opposite Maxim Power and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maxim Power 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 Maxim Power Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.