Correlation Between Capital Power and Transcontinental

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

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

Diversification Opportunities for Capital Power and Transcontinental

0.74

Correlation Coefficient

Capital Power  Transcontinental

Poor diversification

The 3 months correlation between Capital and Transcontinental is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capital Power and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and Capital 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 Capital Power are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Capital Power i.e., Capital Power and Transcontinental go up and down completely randomly.

Pair Corralation between Capital Power and Transcontinental

Assuming the 90 days trading horizon Capital Power is expected to generate 1.02 times more return on investment than Transcontinental. However, Capital Power is 1.02 times more volatile than Transcontinental. It trades about 0.26 of its potential returns per unit of risk. Transcontinental is currently generating about 0.16 per unit of risk. If you would invest  4,962  in Capital Power on April 24, 2025 and sell it today you would earn a total of  1,046  from holding Capital Power or generate 21.08% return on investment over 90 days.

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

Capital Power  vs.  Transcontinental

Capital Power

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Power are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Capital Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Transcontinental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Capital Power and Transcontinental

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

The idea behind Capital Power and Transcontinental 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.