Correlation Between TMX Group and Firan Technology
Can any of the company-specific risk be diversified away by investing in both TMX Group and Firan Technology 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 TMX Group and Firan Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMX Group Limited and Firan Technology Group, you can compare the effects of market volatilities on TMX Group and Firan Technology 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 TMX Group with a short position of Firan Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX Group and Firan Technology.
Diversification Opportunities for TMX Group and Firan Technology
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TMX and Firan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology and TMX Group 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 TMX Group Limited are associated (or correlated) with Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of TMX Group i.e., TMX Group and Firan Technology go up and down completely randomly.
Pair Corralation between TMX Group and Firan Technology
Given the investment horizon of 90 days TMX Group is expected to generate 1.66 times less return on investment than Firan Technology. But when comparing it to its historical volatility, TMX Group Limited is 2.02 times less risky than Firan Technology. It trades about 0.18 of its potential returns per unit of risk. Firan Technology Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 540.00 in Firan Technology Group on September 5, 2024 and sell it today you would earn a total of 187.00 from holding Firan Technology Group or generate 34.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMX Group Limited vs. Firan Technology Group
Performance |
| Timeline |
| TMX Group Limited |
| Firan Technology |
TMX Group and Firan Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMX Group and Firan Technology
The main advantage of trading using opposite TMX Group and Firan Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMX Group position performs unexpectedly, Firan Technology 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 Firan Technology will offset losses from the drop in Firan Technology's long position.| TMX Group vs. Firan Technology Group | TMX Group vs. American Hotel Income | TMX Group vs. CVW CleanTech | TMX Group vs. Canlan Ice Sports |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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