Correlation Between TFI International and Cars

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

By analyzing existing cross correlation between TFI International and Cars Inc, you can compare the effects of market volatilities on TFI International and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFI International and Cars.

Diversification Opportunities for TFI International and Cars

0.9

Correlation Coefficient

TFI International  Cars

Almost no diversification

The 3 months correlation between TFI and Cars is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of TFI International i.e., TFI International and Cars go up and down completely randomly.

Pair Corralation between TFI International and Cars

Given the investment horizon of 90 days TFI International is expected to generate 0.8 times more return on investment than Cars. However, TFI International is 1.25 times less risky than Cars. It trades about 0.01 of its potential returns per unit of risk. Cars Inc is currently generating about -0.03 per unit of risk. If you would invest  13,886  in TFI International on September 23, 2024 and sell it today you would lose (61.00) from holding TFI International or give up 0.44% of portfolio value over 90 days.

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

TFI International  vs.  Cars Inc

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TFI International and Cars

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

The idea behind TFI International and Cars Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.