Correlation Between TFI International and Gen III

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

By analyzing existing cross correlation between TFI International and Gen III Oil, you can compare the effects of market volatilities on TFI International and Gen III 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 TFI International with a short position of Gen III. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFI International and Gen III.

Diversification Opportunities for TFI International and Gen III

0.8

Correlation Coefficient

TFI International  Gen III

Very poor diversification

The 3 months correlation between TFI and Gen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Gen III Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen III Oil and TFI International 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 TFI International are associated (or correlated) with Gen III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen III Oil has no effect on the direction of TFI International i.e., TFI International and Gen III go up and down completely randomly.

Pair Corralation between TFI International and Gen III

Assuming the 90 days trading horizon TFI International is expected to generate 5.06 times less return on investment than Gen III. But when comparing it to its historical volatility, TFI International is 3.61 times less risky than Gen III. It trades about 0.09 of its potential returns per unit of risk. Gen III Oil is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Gen III Oil on September 16, 2024 and sell it today you would earn a total of  12.00  from holding Gen III Oil or generate 54.55% return on investment over 90 days.

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

TFI International  vs.  Gen III Oil

TFI International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TFI International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gen III Oil

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gen III Oil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Gen III showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFI International and Gen III

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

The idea behind TFI International and Gen III Oil 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.