Correlation Between Alphabet and Intact Financial

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

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

Diversification Opportunities for Alphabet and Intact Financial

0.37

Correlation Coefficient

Alphabet  Intact Financial

Weak diversification

The 3 months correlation between Alphabet and Intact is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Alphabet i.e., Alphabet and Intact Financial go up and down completely randomly.

Pair Corralation between Alphabet and Intact Financial

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.24 times more return on investment than Intact Financial. However, Alphabet is 1.24 times more volatile than Intact Financial. It trades about 0.1 of its potential returns per unit of risk. Intact Financial is currently generating about 0.05 per unit of risk. If you would invest  8,762  in Alphabet Inc Class C on September 14, 2024 and sell it today you would earn a total of  10,517  from holding Alphabet Inc Class C or generate 120.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.68%
Values	Daily Returns

Alphabet Inc Class C  vs.  Intact Financial

Alphabet Class C

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Intact Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and Intact Financial

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

The idea behind Alphabet Inc Class C and Intact 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.