Correlation Between IA Financial and Algoma Central
Can any of the company-specific risk be diversified away by investing in both IA Financial and Algoma Central 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 IA Financial and Algoma Central into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iA Financial and Algoma Central, you can compare the effects of market volatilities on IA Financial and Algoma Central 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 IA Financial with a short position of Algoma Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA Financial and Algoma Central.
Diversification Opportunities for IA Financial and Algoma Central
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IAG and Algoma is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central and IA Financial 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 iA Financial are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of IA Financial i.e., IA Financial and Algoma Central go up and down completely randomly.
Pair Corralation between IA Financial and Algoma Central
Assuming the 90 days trading horizon iA Financial is expected to generate 3.88 times more return on investment than Algoma Central. However, IA Financial is 3.88 times more volatile than Algoma Central. It trades about 0.19 of its potential returns per unit of risk. Algoma Central is currently generating about -0.01 per unit of risk. 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 |
iA Financial vs. Algoma Central
Performance |
| Timeline |
| iA Financial |
| Algoma Central |
IA Financial and Algoma Central Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IA Financial and Algoma Central
The main advantage of trading using opposite IA Financial and Algoma Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial position performs unexpectedly, Algoma Central 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 Algoma Central will offset losses from the drop in Algoma Central's long position.| IA Financial vs. Walmart Inc CDR | IA Financial vs. Amazon CDR | IA Financial vs. UPS CDR | IA Financial vs. HOME DEPOT CDR |
| Algoma Central vs. Goodfellow | Algoma Central vs. Leons Furniture Limited | Algoma Central vs. High Liner Foods | Algoma Central vs. Exco Technologies Limited |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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