Correlation Between Intact Financial and GOLDMAN SACHS

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

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

Diversification Opportunities for Intact Financial and GOLDMAN SACHS

0.53

Correlation Coefficient

Intact Financial  GOLDMAN SACHS

Very weak diversification

The 3 months correlation between Intact and GOLDMAN is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial Corp and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR and Intact 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 Intact Financial Corp are associated (or correlated) with GOLDMAN SACHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDMAN SACHS CDR has no effect on the direction of Intact Financial i.e., Intact Financial and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between Intact Financial and GOLDMAN SACHS

Assuming the 90 days trading horizon Intact Financial is expected to generate 6.38 times less return on investment than GOLDMAN SACHS. But when comparing it to its historical volatility, Intact Financial Corp is 3.48 times less risky than GOLDMAN SACHS. It trades about 0.09 of its potential returns per unit of risk. GOLDMAN SACHS CDR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,427  in GOLDMAN SACHS CDR on September 5, 2024 and sell it today you would earn a total of  575.00  from holding GOLDMAN SACHS CDR or generate 23.69% return on investment over 90 days.

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

Intact Financial Corp  vs.  GOLDMAN SACHS CDR

Intact Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

GOLDMAN SACHS CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and GOLDMAN SACHS

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

The idea behind Intact Financial Corp and GOLDMAN SACHS CDR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.