Correlation Between TransAlta Corp and Maxim Power

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

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

Diversification Opportunities for TransAlta Corp and Maxim Power

0.69

Correlation Coefficient

TransAlta Corp  Maxim Power

Poor diversification

The 3 months correlation between TransAlta and Maxim is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta Corp and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and TransAlta Corp 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 TransAlta Corp are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of TransAlta Corp i.e., TransAlta Corp and Maxim Power go up and down completely randomly.

Pair Corralation between TransAlta Corp and Maxim Power

Assuming the 90 days horizon TransAlta Corp is expected to under-perform the Maxim Power. In addition to that, TransAlta Corp is 1.45 times more volatile than Maxim Power Corp. It trades about -0.16 of its total potential returns per unit of risk. Maxim Power Corp is currently generating about -0.19 per unit of volatility. 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

TransAlta Corp  vs.  Maxim Power Corp

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.

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.

Pair Trading with TransAlta Corp and Maxim Power

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

The idea behind TransAlta Corp and Maxim Power 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.