Correlation Between Finning International and IGM Financial

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

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

Diversification Opportunities for Finning International and IGM Financial

-0.59

Correlation Coefficient

Finning International  IGM Financial

Excellent diversification

The 3 months correlation between Finning and IGM is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Finning International and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial and Finning International 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 Finning International 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 Finning International i.e., Finning International and IGM Financial go up and down completely randomly.

Pair Corralation between Finning International and IGM Financial

Assuming the 90 days trading horizon Finning International is expected to under-perform the IGM Financial. In addition to that, Finning International is 2.11 times more volatile than IGM Financial. It trades about -0.01 of its total potential returns per unit of risk. IGM Financial is currently generating about 0.38 per unit of volatility. If you would invest  3,859  in IGM Financial on September 14, 2024 and sell it today you would earn a total of  898.00  from holding IGM Financial or generate 23.27% return on investment over 90 days.

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

Finning International  vs.  IGM Financial

Finning International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finning International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Finning International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IGM Financial

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, IGM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finning International and IGM Financial

The main advantage of trading using opposite Finning International and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finning International 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.

The idea behind Finning International and IGM Financial 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 Stocks Directory module to find actively traded stocks across global markets.