Correlation Between Intact Financial and IShares SPTSX

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

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

Diversification Opportunities for Intact Financial and IShares SPTSX

-0.56

Correlation Coefficient

Intact Financial  IShares SPTSX

Excellent diversification

The 3 months correlation between Intact and IShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped 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 IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Intact Financial i.e., Intact Financial and IShares SPTSX go up and down completely randomly.

Pair Corralation between Intact Financial and IShares SPTSX

Assuming the 90 days trading horizon Intact Financial is expected to generate 0.95 times more return on investment than IShares SPTSX. However, Intact Financial is 1.05 times less risky than IShares SPTSX. It trades about 0.12 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about 0.08 per unit of risk. If you would invest  26,175  in Intact Financial on December 27, 2024 and sell it today you would earn a total of  2,431  from holding Intact Financial or generate 9.29% return on investment over 90 days.

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

Intact Financial  vs.  iShares SPTSX Capped

Intact Financial

Risk-Adjusted Performance

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 April 2025.

iShares SPTSX Capped

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Capped are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Intact Financial and IShares SPTSX

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

The idea behind Intact Financial and iShares SPTSX Capped 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.