Correlation Between SPTSX Dividend and Intact Financial

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

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

Diversification Opportunities for SPTSX Dividend and Intact Financial

0.01

Correlation Coefficient

SPTSX Dividend  Intact Financial

Significant diversification

The 3 months correlation between SPTSX and Intact is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats 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 SPTSX Dividend 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 SPTSX Dividend Aristocrats 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 SPTSX Dividend i.e., SPTSX Dividend and Intact Financial go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Intact Financial

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the Intact Financial. In addition to that, SPTSX Dividend is 1.14 times more volatile than Intact Financial Corp. It trades about -0.13 of its total potential returns per unit of risk. Intact Financial Corp is currently generating about 0.03 per unit of volatility. If you would invest  2,438  in Intact Financial Corp on November 29, 2024 and sell it today you would earn a total of  23.00  from holding Intact Financial Corp or generate 0.94% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Intact Financial Corp

Pair Trading with SPTSX Dividend and Intact Financial

The main advantage of trading using opposite SPTSX Dividend and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend 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 SPTSX Dividend Aristocrats 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.