Correlation Between Intact Financial and ATCO

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

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

Diversification Opportunities for Intact Financial and ATCO

0.86

Correlation Coefficient

Intact Financial  ATCO

Very poor diversification

The 3 months correlation between Intact and ATCO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Intact 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 Intact Financial are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Intact Financial i.e., Intact Financial and ATCO go up and down completely randomly.

Pair Corralation between Intact Financial and ATCO

Assuming the 90 days trading horizon Intact Financial is expected to generate 1.05 times less return on investment than ATCO. But when comparing it to its historical volatility, Intact Financial is 1.73 times less risky than ATCO. It trades about 0.12 of its potential returns per unit of risk. ATCO is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,601  in ATCO on August 31, 2024 and sell it today you would earn a total of  299.00  from holding ATCO or generate 6.5% return on investment over 90 days.

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

Intact Financial  vs.  ATCO

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.

ATCO

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ATCO may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Intact Financial and ATCO

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

The idea behind Intact Financial and ATCO 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.