Correlation Between IA Financial and Intact Financial

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

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

Diversification Opportunities for IA Financial and Intact Financial

0.78

Correlation Coefficient

IA Financial  Intact Financial

Poor diversification

The 3 months correlation between IAG and Intact is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial and IA Financial 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 iA Financial 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 has no effect on the direction of IA Financial i.e., IA Financial and Intact Financial go up and down completely randomly.

Pair Corralation between IA Financial and Intact Financial

Assuming the 90 days trading horizon iA Financial is expected to generate 2.77 times more return on investment than Intact Financial. However, IA Financial is 2.77 times more volatile than Intact Financial. It trades about 0.17 of its potential returns per unit of risk. Intact Financial is currently generating about 0.07 per unit of risk. If you would invest  11,135  in iA Financial on August 31, 2024 and sell it today you would earn a total of  2,178  from holding iA Financial or generate 19.56% return on investment over 90 days.

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

iA Financial  vs.  Intact Financial

iA Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Intact Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Intact Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IA Financial and Intact Financial

The main advantage of trading using opposite IA Financial and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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 iA Financial and Intact 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.