Correlation Between Metro and Intact Financial

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

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

Diversification Opportunities for Metro and Intact Financial

0.22

Correlation Coefficient

Metro  Intact Financial

Modest diversification

The 3 months correlation between Metro and Intact is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial and Metro 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 Metro Inc are associated (or correlated) with Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Metro i.e., Metro and Intact Financial go up and down completely randomly.

Pair Corralation between Metro and Intact Financial

Assuming the 90 days trading horizon Metro is expected to generate 1.41 times less return on investment than Intact Financial. But when comparing it to its historical volatility, Metro Inc is 1.05 times less risky than Intact Financial. It trades about 0.07 of its potential returns per unit of risk. Intact Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,853  in Intact Financial on November 20, 2024 and sell it today you would earn a total of  9,968  from holding Intact Financial or generate 52.87% return on investment over 90 days.

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

Metro Inc  vs.  Intact Financial

Metro Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Metro is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Intact Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 7 (%) 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 March 2025.

Pair Trading with Metro and Intact Financial

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

The idea behind Metro Inc and Intact 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.