Correlation Between TFI International and Mills Music

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

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

Diversification Opportunities for TFI International and Mills Music

0.45

Correlation Coefficient

TFI International  Mills Music

Very weak diversification

The 3 months correlation between TFI and Mills is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Mills Music Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mills Music Trust 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 Mills Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mills Music Trust has no effect on the direction of TFI International i.e., TFI International and Mills Music go up and down completely randomly.

Pair Corralation between TFI International and Mills Music

Given the investment horizon of 90 days TFI International is expected to generate 3.3 times less return on investment than Mills Music. In addition to that, TFI International is 1.21 times more volatile than Mills Music Trust. It trades about 0.09 of its total potential returns per unit of risk. Mills Music Trust is currently generating about 0.34 per unit of volatility. If you would invest  3,600  in Mills Music Trust on September 7, 2024 and sell it today you would earn a total of  272.00  from holding Mills Music Trust or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

TFI International  vs.  Mills Music Trust

TFI International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward indicators, TFI International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mills Music Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Mills Music unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFI International and Mills Music

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

The idea behind TFI International and Mills Music Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.