Correlation Between IGM Financial and National Bank

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

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

Diversification Opportunities for IGM Financial and National Bank

0.5

Correlation Coefficient

IGM Financial  National Bank

Very weak diversification

The 3 months correlation between IGM and National is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and IGM 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 IGM Financial are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of IGM Financial i.e., IGM Financial and National Bank go up and down completely randomly.

Pair Corralation between IGM Financial and National Bank

Assuming the 90 days trading horizon IGM Financial is expected to generate 1.23 times more return on investment than National Bank. However, IGM Financial is 1.23 times more volatile than National Bank of. It trades about -0.03 of its potential returns per unit of risk. National Bank of is currently generating about -0.13 per unit of risk. If you would invest  4,569  in IGM Financial on December 29, 2024 and sell it today you would lose (140.00) from holding IGM Financial or give up 3.06% of portfolio value over 90 days.

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

IGM Financial  vs.  National Bank of

IGM Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGM Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IGM Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with IGM Financial and National Bank

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

The idea behind IGM Financial and National Bank of 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.