Correlation Between North American and IGM Financial
Can any of the company-specific risk be diversified away by investing in both North American and IGM 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 IGM 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 IGM Financial, you can compare the effects of market volatilities on North American and IGM 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 IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and IGM Financial.
Diversification Opportunities for North American and IGM Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between North and IGM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial 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 IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of North American i.e., North American and IGM Financial go up and down completely randomly.
Pair Corralation between North American and IGM Financial
Assuming the 90 days trading horizon North American Financial is expected to generate 1.78 times more return on investment than IGM Financial. However, North American is 1.78 times more volatile than IGM Financial. It trades about 0.37 of its potential returns per unit of risk. IGM Financial is currently generating about 0.51 per unit of risk. If you would invest 639.00 in North American Financial on September 4, 2024 and sell it today you would earn a total of 93.00 from holding North American Financial or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. IGM Financial
Performance |
| Timeline |
| North American Financial |
| IGM Financial |
North American and IGM Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and IGM Financial
The main advantage of trading using opposite North American and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, IGM 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 IGM Financial will offset losses from the drop in IGM 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 |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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