Correlation Between TFI International and Montauk Renewables

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

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

Diversification Opportunities for TFI International and Montauk Renewables

0.44

Correlation Coefficient

TFI International  Montauk Renewables

Very weak diversification

The 3 months correlation between TFI and Montauk is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of TFI International i.e., TFI International and Montauk Renewables go up and down completely randomly.

Pair Corralation between TFI International and Montauk Renewables

Given the investment horizon of 90 days TFI International is expected to under-perform the Montauk Renewables. But the stock apears to be less risky and, when comparing its historical volatility, TFI International is 1.16 times less risky than Montauk Renewables. The stock trades about -0.42 of its potential returns per unit of risk. The Montauk Renewables is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Montauk Renewables on December 10, 2024 and sell it today you would lose (148.00) from holding Montauk Renewables or give up 34.42% of portfolio value over 90 days.

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

TFI International  vs.  Montauk Renewables

TFI International

Risk-Adjusted Performance

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with TFI International and Montauk Renewables

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

The idea behind TFI International and Montauk Renewables 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..