Correlation Between Great Wes and Intact Financial

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

By analyzing existing cross correlation between Great Wes 515 and Intact Financial Corp, you can compare the effects of market volatilities on Great Wes 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 Great Wes with a short position of Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Intact Financial.

Diversification Opportunities for Great Wes and Intact Financial

0.91

Correlation Coefficient

Great Wes  Intact Financial

Almost no diversification

The 3 months correlation between Great and Intact is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 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 Great Wes 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 Great Wes 515 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 Great Wes i.e., Great Wes and Intact Financial go up and down completely randomly.

Pair Corralation between Great Wes and Intact Financial

Assuming the 90 days trading horizon Great Wes 515 is expected to under-perform the Intact Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Great Wes 515 is 1.06 times less risky than Intact Financial. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Intact Financial Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,218  in Intact Financial Corp on September 4, 2024 and sell it today you would lose (24.00) from holding Intact Financial Corp or give up 1.08% of portfolio value over 90 days.

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

Great Wes 515  vs.  Intact Financial Corp

Great Wes 515

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wes 515 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great Wes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intact Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intact Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Great Wes and Intact Financial

The main advantage of trading using opposite Great Wes and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wes 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 Great Wes 515 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.