Correlation Between TransAlta and Datang International

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

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

Diversification Opportunities for TransAlta and Datang International

-0.45

Correlation Coefficient

TransAlta  Datang International

Very good diversification

The 3 months correlation between TransAlta and Datang is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding TransAlta and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International and TransAlta 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 are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of TransAlta i.e., TransAlta and Datang International go up and down completely randomly.

Pair Corralation between TransAlta and Datang International

Assuming the 90 days horizon TransAlta is expected to under-perform the Datang International. But the stock apears to be less risky and, when comparing its historical volatility, TransAlta is 1.03 times less risky than Datang International. The stock trades about -0.18 of its potential returns per unit of risk. The Datang International Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Datang International Power on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Datang International Power or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TransAlta  vs.  Datang International Power

TransAlta

Risk-Adjusted Performance

Very Weak

Over the last 90 days TransAlta has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Datang International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Datang International Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Datang International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TransAlta and Datang International

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

The idea behind TransAlta and Datang International Power 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..