Correlation Between Brompton Lifeco and IGM Financial

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

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

Diversification Opportunities for Brompton Lifeco and IGM Financial

0.79

Correlation Coefficient

Brompton Lifeco  IGM Financial

Poor diversification

The 3 months correlation between Brompton and IGM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Lifeco Split and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and Brompton Lifeco 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 Brompton Lifeco Split are associated (or correlated) with IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Brompton Lifeco i.e., Brompton Lifeco and IGM Financial go up and down completely randomly.

Pair Corralation between Brompton Lifeco and IGM Financial

Assuming the 90 days trading horizon Brompton Lifeco Split is expected to generate 1.55 times more return on investment than IGM Financial. However, Brompton Lifeco is 1.55 times more volatile than IGM Financial. It trades about 0.04 of its potential returns per unit of risk. IGM Financial is currently generating about -0.07 per unit of risk. If you would invest  796.00  in Brompton Lifeco Split on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Brompton Lifeco Split or generate 1.51% return on investment over 90 days.

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

Brompton Lifeco Split  vs.  IGM Financial

Brompton Lifeco Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brompton Lifeco Split 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.

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.

Pair Trading with Brompton Lifeco and IGM Financial

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

The idea behind Brompton Lifeco Split and IGM Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.