Correlation Between Eagle Financial and TMX Group

Can any of the company-specific risk be diversified away by investing in both Eagle Financial and TMX Group 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 Eagle Financial and TMX Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Financial Services and TMX Group Limited, you can compare the effects of market volatilities on Eagle Financial and TMX Group 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 Eagle Financial with a short position of TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Financial and TMX Group.

Diversification Opportunities for Eagle Financial and TMX Group

-0.08

Correlation Coefficient

Eagle Financial  TMX Group

Good diversification

The 3 months correlation between Eagle and TMX is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited and Eagle 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 Eagle Financial Services are associated (or correlated) with TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Eagle Financial i.e., Eagle Financial and TMX Group go up and down completely randomly.

Pair Corralation between Eagle Financial and TMX Group

Given the investment horizon of 90 days Eagle Financial Services is expected to generate 0.78 times more return on investment than TMX Group. However, Eagle Financial Services is 1.28 times less risky than TMX Group. It trades about 0.27 of its potential returns per unit of risk. TMX Group Limited is currently generating about -0.15 per unit of risk. If you would invest  3,470  in Eagle Financial Services on September 22, 2024 and sell it today you would earn a total of  129.00  from holding Eagle Financial Services or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eagle Financial Services  vs.  TMX Group Limited

Eagle Financial Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Eagle Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TMX Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMX Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TMX Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eagle Financial and TMX Group

The main advantage of trading using opposite Eagle Financial and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Financial position performs unexpectedly, TMX Group 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 TMX Group will offset losses from the drop in TMX Group's long position.

The idea behind Eagle Financial Services and TMX Group Limited 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.