Correlation Between Imperial Metals and TMX Group

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

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

Diversification Opportunities for Imperial Metals and TMX Group

-0.53

Correlation Coefficient

Imperial Metals  TMX Group

Excellent diversification

The 3 months correlation between Imperial and TMX is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Metals 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 Imperial Metals 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 Imperial Metals 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 Imperial Metals i.e., Imperial Metals and TMX Group go up and down completely randomly.

Pair Corralation between Imperial Metals and TMX Group

Assuming the 90 days trading horizon Imperial Metals is expected to under-perform the TMX Group. In addition to that, Imperial Metals is 3.46 times more volatile than TMX Group Limited. It trades about -0.08 of its total potential returns per unit of risk. TMX Group Limited is currently generating about 0.12 per unit of volatility. If you would invest  4,204  in TMX Group Limited on October 5, 2024 and sell it today you would earn a total of  246.00  from holding TMX Group Limited or generate 5.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Imperial Metals  vs.  TMX Group Limited

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

TMX Group Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TMX Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Imperial Metals and TMX Group

The main advantage of trading using opposite Imperial Metals and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Metals 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 Imperial Metals 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.