Correlation Between Alphabet and Intact Financial

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

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

Diversification Opportunities for Alphabet and Intact Financial

-0.28

Correlation Coefficient

Alphabet  Intact Financial

Very good diversification

The 3 months correlation between Alphabet and Intact is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Intact Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial Corp and Alphabet 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 Alphabet Inc CDR are associated (or correlated) with Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial Corp has no effect on the direction of Alphabet i.e., Alphabet and Intact Financial go up and down completely randomly.

Pair Corralation between Alphabet and Intact Financial

Assuming the 90 days trading horizon Alphabet is expected to generate 2.03 times less return on investment than Intact Financial. In addition to that, Alphabet is 4.75 times more volatile than Intact Financial Corp. It trades about 0.01 of its total potential returns per unit of risk. Intact Financial Corp is currently generating about 0.06 per unit of volatility. If you would invest  2,426  in Intact Financial Corp on December 2, 2024 and sell it today you would earn a total of  44.00  from holding Intact Financial Corp or generate 1.81% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Intact Financial Corp

Alphabet CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Alphabet is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Intact Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Intact Financial

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

The idea behind Alphabet Inc CDR and Intact Financial Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.