Correlation Between Canso Credit and Intact Financial
Can any of the company-specific risk be diversified away by investing in both Canso Credit 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 Canso Credit and Intact Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canso Credit Trust and Intact Financial Corp, you can compare the effects of market volatilities on Canso Credit 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 Canso Credit with a short position of Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Credit and Intact Financial.
Diversification Opportunities for Canso Credit and Intact Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Canso and Intact is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust 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 Canso Credit 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 Canso Credit Trust 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 Canso Credit i.e., Canso Credit and Intact Financial go up and down completely randomly.
Pair Corralation between Canso Credit and Intact Financial
Assuming the 90 days trading horizon Canso Credit is expected to generate 3.26 times less return on investment than Intact Financial. But when comparing it to its historical volatility, Canso Credit Trust is 1.54 times less risky than Intact Financial. It trades about 0.05 of its potential returns per unit of risk. Intact Financial Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,405 in Intact Financial Corp on August 29, 2024 and sell it today you would earn a total of 36.00 from holding Intact Financial Corp or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canso Credit Trust vs. Intact Financial Corp
Performance |
| Timeline |
| Canso Credit Trust |
| Intact Financial Corp |
Canso Credit and Intact Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canso Credit and Intact Financial
The main advantage of trading using opposite Canso Credit and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canso Credit 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.| Canso Credit vs. MINT Income Fund | Canso Credit vs. Canadian High Income | Canso Credit vs. Blue Ribbon Income | Canso Credit vs. Australian REIT Income |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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