Correlation Between Power Financial and Intact Financial
Can any of the company-specific risk be diversified away by investing in both Power Financial 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 Power Financial and Intact Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Intact Financial Corp, you can compare the effects of market volatilities on Power Financial 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 Power Financial with a short position of Intact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Intact Financial.
Diversification Opportunities for Power Financial and Intact Financial
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Power and Intact is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp 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 Power 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 Power Financial Corp 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 Power Financial i.e., Power Financial and Intact Financial go up and down completely randomly.
Pair Corralation between Power Financial and Intact Financial
Assuming the 90 days trading horizon Power Financial is expected to generate 1.47 times less return on investment than Intact Financial. But when comparing it to its historical volatility, Power Financial Corp is 1.14 times less risky than Intact Financial. It trades about 0.08 of its potential returns per unit of risk. Intact Financial Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,870 in Intact Financial Corp on August 25, 2024 and sell it today you would earn a total of 555.00 from holding Intact Financial Corp or generate 29.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Financial Corp vs. Intact Financial Corp
Performance |
| Timeline |
| Power Financial Corp |
| Intact Financial Corp |
Power Financial and Intact Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Intact Financial
The main advantage of trading using opposite Power Financial and Intact Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial 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.| Power Financial vs. Great West Lifeco | Power Financial vs. Power Financial Corp | Power Financial vs. Power Financial 51 | Power Financial vs. Intact Financial Corp |
| Intact Financial vs. Forstrong Global Income | Intact Financial vs. BMO Aggregate Bond | Intact Financial vs. Terreno Resources Corp | Intact Financial vs. iShares Canadian HYBrid |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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