Correlation Between Molson Coors and IA Financial

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

By analyzing existing cross correlation between Molson Coors Canada and iA Financial, you can compare the effects of market volatilities on Molson Coors and IA 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 Molson Coors with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and IA Financial.

Diversification Opportunities for Molson Coors and IA Financial

0.8

Correlation Coefficient

Molson Coors  IA Financial

Very poor diversification

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

Pair Corralation between Molson Coors and IA Financial

Assuming the 90 days trading horizon Molson Coors is expected to generate 1.35 times less return on investment than IA Financial. In addition to that, Molson Coors is 1.23 times more volatile than iA Financial. It trades about 0.05 of its total potential returns per unit of risk. iA Financial is currently generating about 0.08 per unit of volatility. If you would invest  7,810  in iA Financial on October 5, 2024 and sell it today you would earn a total of  5,346  from holding iA Financial or generate 68.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	70.25%
Values	Daily Returns

Molson Coors Canada  vs.  iA Financial

Molson Coors Canada

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Molson Coors Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Molson Coors unveiled solid returns over the last few months and may actually be approaching a breakup point.

iA Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, IA Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molson Coors and IA Financial

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

The idea behind Molson Coors Canada and iA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.