Correlation Between Toromont Industries and IGM Financial
Can any of the company-specific risk be diversified away by investing in both Toromont Industries and IGM 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 Toromont Industries and IGM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toromont Industries and IGM Financial, you can compare the effects of market volatilities on Toromont Industries and IGM 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 Toromont Industries with a short position of IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and IGM Financial.
Diversification Opportunities for Toromont Industries and IGM Financial
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toromont and IGM is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and Toromont Industries 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 Toromont Industries are associated (or correlated) with IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Toromont Industries i.e., Toromont Industries and IGM Financial go up and down completely randomly.
Pair Corralation between Toromont Industries and IGM Financial
Assuming the 90 days trading horizon Toromont Industries is expected to under-perform the IGM Financial. In addition to that, Toromont Industries is 1.02 times more volatile than IGM Financial. It trades about -0.32 of its total potential returns per unit of risk. IGM Financial is currently generating about 0.62 per unit of volatility. If you would invest 4,183 in IGM Financial on September 1, 2024 and sell it today you would earn a total of 548.00 from holding IGM Financial or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toromont Industries vs. IGM Financial
Performance |
| Timeline |
| Toromont Industries |
| IGM Financial |
Toromont Industries and IGM Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toromont Industries and IGM Financial
The main advantage of trading using opposite Toromont Industries and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toromont Industries position performs unexpectedly, IGM 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 IGM Financial will offset losses from the drop in IGM Financial's long position.| Toromont Industries vs. Finning International | Toromont Industries vs. Stantec | Toromont Industries vs. Ritchie Bros Auctioneers | Toromont Industries vs. CCL Industries |
| IGM Financial vs. CI Financial Corp | IGM Financial vs. Great West Lifeco | IGM Financial vs. iA Financial | IGM Financial vs. Power |
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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