Correlation Between Intact Financial and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both Intact Financial and Laurentian Bank 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 Intact Financial and Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intact Financial Corp and Laurentian Bank, you can compare the effects of market volatilities on Intact Financial and Laurentian Bank 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 Intact Financial with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intact Financial and Laurentian Bank.
Diversification Opportunities for Intact Financial and Laurentian Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intact and Laurentian is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial Corp and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Intact 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 Intact Financial Corp are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Intact Financial i.e., Intact Financial and Laurentian Bank go up and down completely randomly.
Pair Corralation between Intact Financial and Laurentian Bank
Assuming the 90 days trading horizon Intact Financial Corp is expected to generate 0.61 times more return on investment than Laurentian Bank. However, Intact Financial Corp is 1.65 times less risky than Laurentian Bank. It trades about 0.11 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.06 per unit of risk. If you would invest 2,064 in Intact Financial Corp on September 1, 2024 and sell it today you would earn a total of 374.00 from holding Intact Financial Corp or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intact Financial Corp vs. Laurentian Bank
Performance |
| Timeline |
| Intact Financial Corp |
| Laurentian Bank |
Intact Financial and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intact Financial and Laurentian Bank
The main advantage of trading using opposite Intact Financial and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact Financial position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.| Intact Financial vs. Intact Financial Corp | Intact Financial vs. National Bank of | Intact Financial vs. Fairfax Financial Holdings | Intact Financial vs. Fairfax Financial Holdings |
| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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