Correlation Between Innergex Renewable and Transalta

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

By analyzing existing cross correlation between Innergex Renewable Energy and Transalta A Cum, you can compare the effects of market volatilities on Innergex Renewable 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 Innergex Renewable with a short position of Transalta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innergex Renewable and Transalta.

Diversification Opportunities for Innergex Renewable and Transalta

0.87

Correlation Coefficient

Innergex Renewable  Transalta

Very poor diversification

The 3 months correlation between Innergex and Transalta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Innergex Renewable Energy and Transalta A Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transalta A Cum and Innergex Renewable 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 Innergex Renewable Energy 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 A Cum has no effect on the direction of Innergex Renewable i.e., Innergex Renewable and Transalta go up and down completely randomly.

Pair Corralation between Innergex Renewable and Transalta

Assuming the 90 days trading horizon Innergex Renewable is expected to generate 2.49 times less return on investment than Transalta. But when comparing it to its historical volatility, Innergex Renewable Energy is 2.6 times less risky than Transalta. It trades about 0.28 of its potential returns per unit of risk. Transalta A Cum is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,508  in Transalta A Cum on April 21, 2025 and sell it today you would earn a total of  230.00  from holding Transalta A Cum or generate 15.25% return on investment over 90 days.

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

Innergex Renewable Energy  vs.  Transalta A Cum

Innergex Renewable Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innergex Renewable Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Innergex Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transalta A Cum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transalta A Cum are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Transalta unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innergex Renewable and Transalta

The main advantage of trading using opposite Innergex Renewable and Transalta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innergex Renewable 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 Innergex Renewable Energy and Transalta A Cum 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.