Correlation Between CGI and Topicus

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

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

Diversification Opportunities for CGI and Topicus

-0.17

Correlation Coefficient

CGI  Topicus

Good diversification

The 3 months correlation between CGI and Topicus is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus and CGI 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 CGI Inc are associated (or correlated) with Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of CGI i.e., CGI and Topicus go up and down completely randomly.

Pair Corralation between CGI and Topicus

Assuming the 90 days trading horizon CGI Inc is expected to generate 0.72 times more return on investment than Topicus. However, CGI Inc is 1.38 times less risky than Topicus. It trades about 0.03 of its potential returns per unit of risk. Topicus is currently generating about -0.16 per unit of risk. If you would invest  15,766  in CGI Inc on September 16, 2024 and sell it today you would earn a total of  256.00  from holding CGI Inc or generate 1.62% return on investment over 90 days.

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

CGI Inc  vs.  Topicus

CGI Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGI Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CGI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Pair Trading with CGI and Topicus

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

The idea behind CGI Inc and Topicus 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.