Correlation Between IShares Canadian and Intact Financial

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

By analyzing existing cross correlation between iShares Canadian HYBrid and Intact Financial Corp, you can compare the effects of market volatilities on IShares Canadian and Intact 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 IShares Canadian with a short position of Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Intact Financial.

Diversification Opportunities for IShares Canadian and Intact Financial

0.6

Correlation Coefficient

IShares Canadian  Intact Financial

Poor diversification

The 3 months correlation between IShares and Intact is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Intact Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial Corp and IShares Canadian 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 iShares Canadian HYBrid are associated (or correlated) with Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial Corp has no effect on the direction of IShares Canadian i.e., IShares Canadian and Intact Financial go up and down completely randomly.

Pair Corralation between IShares Canadian and Intact Financial

Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.19 times less return on investment than Intact Financial. But when comparing it to its historical volatility, iShares Canadian HYBrid is 2.25 times less risky than Intact Financial. It trades about 0.19 of its potential returns per unit of risk. Intact Financial Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,347  in Intact Financial Corp on August 31, 2024 and sell it today you would earn a total of  91.00  from holding Intact Financial Corp or generate 3.88% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Intact Financial Corp

iShares Canadian HYBrid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Intact Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Canadian and Intact Financial

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

The idea behind iShares Canadian HYBrid and Intact Financial Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.