Correlation Between Rocky Mountain and IA Financial
Can any of the company-specific risk be diversified away by investing in both Rocky Mountain and IA 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 Rocky Mountain and IA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocky Mountain Liquor and iA Financial, you can compare the effects of market volatilities on Rocky Mountain and IA 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 Rocky Mountain with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and IA Financial.
Diversification Opportunities for Rocky Mountain and IA Financial
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rocky and IAG is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and IA Financial go up and down completely randomly.
Pair Corralation between Rocky Mountain and IA Financial
Assuming the 90 days horizon Rocky Mountain is expected to generate 1.1 times less return on investment than IA Financial. In addition to that, Rocky Mountain is 3.68 times more volatile than iA Financial. It trades about 0.02 of its total potential returns per unit of risk. iA Financial is currently generating about 0.09 per unit of volatility. If you would invest 8,676 in iA Financial on September 12, 2024 and sell it today you would earn a total of 4,885 from holding iA Financial or generate 56.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocky Mountain Liquor vs. iA Financial
Performance |
| Timeline |
| Rocky Mountain Liquor |
| iA Financial |
Rocky Mountain and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocky Mountain and IA Financial
The main advantage of trading using opposite Rocky Mountain and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain position performs unexpectedly, IA 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 IA Financial will offset losses from the drop in IA Financial's long position.| Rocky Mountain vs. Apple Inc CDR | Rocky Mountain vs. NVIDIA CDR | Rocky Mountain vs. Microsoft Corp CDR | Rocky Mountain vs. Amazon CDR |
| IA Financial vs. Brompton Lifeco Split | IA Financial vs. North American Financial | IA Financial vs. Prime Dividend Corp | IA Financial vs. Financial 15 Split |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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