Correlation Between First National and IGM Financial

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

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

Diversification Opportunities for First National and IGM Financial

0.73

Correlation Coefficient

First National  IGM Financial

Poor diversification

The 3 months correlation between First and IGM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and First National 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 First National Financial 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 First National i.e., First National and IGM Financial go up and down completely randomly.

Pair Corralation between First National and IGM Financial

Assuming the 90 days trading horizon First National is expected to generate 1.39 times less return on investment than IGM Financial. In addition to that, First National is 1.43 times more volatile than IGM Financial. It trades about 0.1 of its total potential returns per unit of risk. IGM Financial is currently generating about 0.2 per unit of volatility. If you would invest  4,087  in IGM Financial on October 4, 2024 and sell it today you would earn a total of  504.00  from holding IGM Financial or generate 12.33% return on investment over 90 days.

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

First National Financial  vs.  IGM Financial

First National Financial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

IGM Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 15 (%) 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 First National and IGM Financial

The main advantage of trading using opposite First National and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Financial 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.