Correlation Between North American and Intact Financial
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Intact Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and Intact Financial Corp, you can compare the effects of market volatilities on North American 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 North American with a short position of Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Intact Financial.
Diversification Opportunities for North American and Intact Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and Intact is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial 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 North American 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 North American Financial 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 North American i.e., North American and Intact Financial go up and down completely randomly.
Pair Corralation between North American and Intact Financial
Assuming the 90 days trading horizon North American Financial is expected to generate 3.07 times more return on investment than Intact Financial. However, North American is 3.07 times more volatile than Intact Financial Corp. It trades about 0.28 of its potential returns per unit of risk. Intact Financial Corp is currently generating about 0.13 per unit of risk. If you would invest 677.00 in North American Financial on September 1, 2024 and sell it today you would earn a total of 75.00 from holding North American Financial or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. Intact Financial Corp
Performance |
| Timeline |
| North American Financial |
| Intact Financial Corp |
North American and Intact Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Intact Financial
The main advantage of trading using opposite North American and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
| Intact Financial vs. Intact Financial Corp | Intact Financial vs. National Bank of | Intact Financial vs. Fairfax Financial Holdings | Intact Financial vs. Fairfax Financial Holdings |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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