Correlation Between LANDSEA HOMES and TransAlta

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

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

Diversification Opportunities for LANDSEA HOMES and TransAlta

0.86

Correlation Coefficient

LANDSEA HOMES  TransAlta

Very poor diversification

The 3 months correlation between LANDSEA and TransAlta is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta and LANDSEA HOMES 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 LANDSEA HOMES P are associated (or correlated) with TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and TransAlta go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and TransAlta

Assuming the 90 days horizon LANDSEA HOMES P is expected to generate 3.74 times more return on investment than TransAlta. However, LANDSEA HOMES is 3.74 times more volatile than TransAlta. It trades about 0.15 of its potential returns per unit of risk. TransAlta is currently generating about 0.21 per unit of risk. If you would invest  530.00  in LANDSEA HOMES P on April 23, 2025 and sell it today you would earn a total of  435.00  from holding LANDSEA HOMES P or generate 82.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	84.13%
Values	Daily Returns

LANDSEA HOMES P  vs.  TransAlta

LANDSEA HOMES P

Risk-Adjusted Performance

Good

Over the last 90 days LANDSEA HOMES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, LANDSEA HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

TransAlta

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TransAlta are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TransAlta reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LANDSEA HOMES and TransAlta

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

The idea behind LANDSEA HOMES P and TransAlta 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.