Correlation Between Eddy Smart and IGM Financial

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

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

Diversification Opportunities for Eddy Smart and IGM Financial

-0.85

Correlation Coefficient

Eddy Smart  IGM Financial

Pay attention - limited upside

The 3 months correlation between Eddy and IGM is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Eddy Smart Home and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and Eddy Smart 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 Eddy Smart Home are associated (or correlated) with IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Eddy Smart i.e., Eddy Smart and IGM Financial go up and down completely randomly.

Pair Corralation between Eddy Smart and IGM Financial

Assuming the 90 days horizon Eddy Smart Home is expected to generate 6.99 times more return on investment than IGM Financial. However, Eddy Smart is 6.99 times more volatile than IGM Financial. It trades about 0.22 of its potential returns per unit of risk. IGM Financial is currently generating about -0.16 per unit of risk. If you would invest  240.00  in Eddy Smart Home on October 12, 2024 and sell it today you would earn a total of  85.00  from holding Eddy Smart Home or generate 35.42% return on investment over 90 days.

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

Eddy Smart Home  vs.  IGM Financial

Eddy Smart Home

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eddy Smart Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eddy Smart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

IGM Financial

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Eddy Smart and IGM Financial

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

The idea behind Eddy Smart Home and IGM Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.