Correlation Between TMX GROUP and London Stock
Can any of the company-specific risk be diversified away by investing in both TMX GROUP and London Stock 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 TMX GROUP and London Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMX GROUP LTD and London Stock Exchange, you can compare the effects of market volatilities on TMX GROUP and London Stock 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 TMX GROUP with a short position of London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX GROUP and London Stock.
Diversification Opportunities for TMX GROUP and London Stock
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TMX and London is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TMX GROUP LTD and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange and TMX GROUP 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 TMX GROUP LTD are associated (or correlated) with London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of TMX GROUP i.e., TMX GROUP and London Stock go up and down completely randomly.
Pair Corralation between TMX GROUP and London Stock
Assuming the 90 days horizon TMX GROUP LTD is expected to under-perform the London Stock. In addition to that, TMX GROUP is 1.35 times more volatile than London Stock Exchange. It trades about -0.02 of its total potential returns per unit of risk. London Stock Exchange is currently generating about 0.05 per unit of volatility. If you would invest 13,300 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 200.00 from holding London Stock Exchange or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMX GROUP LTD vs. London Stock Exchange
Performance |
| Timeline |
| TMX GROUP LTD |
| London Stock Exchange |
TMX GROUP and London Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMX GROUP and London Stock
The main advantage of trading using opposite TMX GROUP and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMX GROUP position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.| TMX GROUP vs. LION ONE METALS | TMX GROUP vs. SERI INDUSTRIAL EO | TMX GROUP vs. GRIFFIN MINING LTD | TMX GROUP vs. MCEWEN MINING INC |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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