Correlation Between Intact Financial and TMX Group

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

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

Diversification Opportunities for Intact Financial and TMX Group

0.94

Correlation Coefficient

Intact Financial  TMX Group

Almost no diversification

The 3 months correlation between Intact and TMX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Intact Financial i.e., Intact Financial and TMX Group go up and down completely randomly.

Pair Corralation between Intact Financial and TMX Group

Assuming the 90 days trading horizon Intact Financial is expected to generate 1.65 times less return on investment than TMX Group. But when comparing it to its historical volatility, Intact Financial is 1.14 times less risky than TMX Group. It trades about 0.14 of its potential returns per unit of risk. TMX Group Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,414  in TMX Group Limited on December 28, 2024 and sell it today you would earn a total of  806.00  from holding TMX Group Limited or generate 18.26% return on investment over 90 days.

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

Intact Financial  vs.  TMX Group Limited

Intact Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 10 (%) 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 April 2025.

TMX Group Limited

Risk-Adjusted Performance

Good

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

Pair Trading with Intact Financial and TMX Group

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

The idea behind Intact Financial and TMX Group Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.