Correlation Between TC Energy and TransAlta Corp

Can any of the company-specific risk be diversified away by investing in both TC 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 TC 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 TC Energy Corp and TransAlta Corp, you can compare the effects of market volatilities on TC 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 TC Energy with a short position of TransAlta Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of TC Energy and TransAlta Corp.

Diversification Opportunities for TC Energy and TransAlta Corp

0.1

Correlation Coefficient

TC Energy  TransAlta Corp

Average diversification

The 3 months correlation between TRP and TransAlta is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy Corp and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp and TC 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 TC Energy 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 TC Energy i.e., TC Energy and TransAlta Corp go up and down completely randomly.

Pair Corralation between TC Energy and TransAlta Corp

Assuming the 90 days trading horizon TC Energy Corp is expected to generate 0.34 times more return on investment than TransAlta Corp. However, TC Energy Corp is 2.93 times less risky than TransAlta Corp. It trades about 0.06 of its potential returns per unit of risk. TransAlta Corp is currently generating about -0.16 per unit of risk. If you would invest  6,621  in TC Energy Corp on December 29, 2024 and sell it today you would earn a total of  261.00  from holding TC Energy Corp or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

TC Energy Corp  vs.  TransAlta Corp

TC Energy Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

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 TC Energy and TransAlta Corp

The main advantage of trading using opposite TC Energy and TransAlta Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC 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.

The idea behind TC Energy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.