Correlation Between Intact Financial and Kingspan Group

Can any of the company-specific risk be diversified away by investing in both Intact Financial and Kingspan 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 Kingspan 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 Kingspan Group PLC, you can compare the effects of market volatilities on Intact Financial and Kingspan 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 Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intact Financial and Kingspan Group.

Diversification Opportunities for Intact Financial and Kingspan Group

0.65

Correlation Coefficient

Intact Financial  Kingspan Group

Poor diversification

The 3 months correlation between Intact and Kingspan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and Kingspan Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group PLC 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group PLC has no effect on the direction of Intact Financial i.e., Intact Financial and Kingspan Group go up and down completely randomly.

Pair Corralation between Intact Financial and Kingspan Group

Assuming the 90 days horizon Intact Financial is expected to generate 1.45 times less return on investment than Kingspan Group. But when comparing it to its historical volatility, Intact Financial is 2.03 times less risky than Kingspan Group. It trades about 0.12 of its potential returns per unit of risk. Kingspan Group PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,275  in Kingspan Group PLC on December 30, 2024 and sell it today you would earn a total of  1,021  from holding Kingspan Group PLC or generate 14.03% return on investment over 90 days.

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

Intact Financial  vs.  Kingspan Group PLC

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. Despite nearly fragile basic indicators, Intact Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kingspan Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kingspan Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and Kingspan Group

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

The idea behind Intact Financial and Kingspan Group PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.