Correlation Between TMX Group and Wishpond Technologies

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Can any of the company-specific risk be diversified away by investing in both TMX Group and Wishpond Technologies 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 Wishpond Technologies 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 Wishpond Technologies, you can compare the effects of market volatilities on TMX Group and Wishpond Technologies 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 Wishpond Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX Group and Wishpond Technologies.

Diversification Opportunities for TMX Group and Wishpond Technologies

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between TMX and Wishpond is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and Wishpond Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wishpond Technologies 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 Wishpond Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wishpond Technologies has no effect on the direction of TMX Group i.e., TMX Group and Wishpond Technologies go up and down completely randomly.

Pair Corralation between TMX Group and Wishpond Technologies

Given the investment horizon of 90 days TMX Group Limited is expected to generate 0.12 times more return on investment than Wishpond Technologies. However, TMX Group Limited is 8.36 times less risky than Wishpond Technologies. It trades about 0.1 of its potential returns per unit of risk. Wishpond Technologies is currently generating about -0.05 per unit of risk. If you would invest  4,355  in TMX Group Limited on September 4, 2024 and sell it today you would earn a total of  86.00  from holding TMX Group Limited or generate 1.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

TMX Group Limited  vs.  Wishpond Technologies

 Performance 
       Timeline  
TMX Group Limited 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TMX Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Wishpond Technologies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wishpond Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

TMX Group and Wishpond Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TMX Group and Wishpond Technologies

The main advantage of trading using opposite TMX Group and Wishpond Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMX Group position performs unexpectedly, Wishpond Technologies 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 Wishpond Technologies will offset losses from the drop in Wishpond Technologies' long position.
The idea behind TMX Group Limited and Wishpond Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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