Correlation Between Algoma Central and IA Financial
Can any of the company-specific risk be diversified away by investing in both Algoma Central 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 Algoma Central and IA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Central and iA Financial, you can compare the effects of market volatilities on Algoma Central 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 Algoma Central with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Central and IA Financial.
Diversification Opportunities for Algoma Central and IA Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algoma and IAG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Central and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial and Algoma Central 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 Algoma Central 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 Algoma Central i.e., Algoma Central and IA Financial go up and down completely randomly.
Pair Corralation between Algoma Central and IA Financial
Assuming the 90 days trading horizon Algoma Central is expected to under-perform the IA Financial. But the stock apears to be less risky and, when comparing its historical volatility, Algoma Central is 3.88 times less risky than IA Financial. The stock trades about -0.01 of its potential returns per unit of risk. The iA Financial is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 11,506 in iA Financial on August 25, 2024 and sell it today you would earn a total of 1,689 from holding iA Financial or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Central vs. iA Financial
Performance |
| Timeline |
| Algoma Central |
| iA Financial |
Algoma Central and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Central and IA Financial
The main advantage of trading using opposite Algoma Central and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Central 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.| Algoma Central vs. Goodfellow | Algoma Central vs. Leons Furniture Limited | Algoma Central vs. High Liner Foods | Algoma Central vs. Exco Technologies Limited |
| IA Financial vs. Walmart Inc CDR | IA Financial vs. Amazon CDR | IA Financial vs. UPS CDR | IA Financial vs. HOME DEPOT CDR |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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