Correlation Between S A P and Intact Financial

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

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

Diversification Opportunities for S A P and Intact Financial

-0.89

Correlation Coefficient

S A P  Intact Financial

Pay attention - limited upside

The 3 months correlation between SAP and Intact is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial and S A P 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 Saputo 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 S A P i.e., S A P and Intact Financial go up and down completely randomly.

Pair Corralation between S A P and Intact Financial

Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Intact Financial. In addition to that, S A P is 1.13 times more volatile than Intact Financial. It trades about -0.16 of its total potential returns per unit of risk. Intact Financial is currently generating about 0.14 per unit of volatility. If you would invest  25,073  in Intact Financial on September 4, 2024 and sell it today you would earn a total of  2,012  from holding Intact Financial or generate 8.02% return on investment over 90 days.

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

Saputo Inc  vs.  Intact Financial

Saputo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saputo Inc 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.

Intact Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 11 (%) 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 January 2025.

Pair Trading with S A P and Intact Financial

The main advantage of trading using opposite S A P and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 Saputo 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.