Correlation Between Intact Financial and Tesla

Can any of the company-specific risk be diversified away by investing in both Intact Financial and Tesla 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 Tesla 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 Tesla Inc CDR, you can compare the effects of market volatilities on Intact Financial and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intact Financial and Tesla.

Diversification Opportunities for Intact Financial and Tesla

0.57

Correlation Coefficient

Intact Financial  Tesla

Very weak diversification

The 3 months correlation between Intact and Tesla is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial Corp and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc CDR has no effect on the direction of Intact Financial i.e., Intact Financial and Tesla go up and down completely randomly.

Pair Corralation between Intact Financial and Tesla

Assuming the 90 days trading horizon Intact Financial is expected to generate 21.12 times less return on investment than Tesla. But when comparing it to its historical volatility, Intact Financial Corp is 7.45 times less risky than Tesla. It trades about 0.08 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,105  in Tesla Inc CDR on September 13, 2024 and sell it today you would earn a total of  1,765  from holding Tesla Inc CDR or generate 83.85% 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.  Tesla Inc CDR

Intact Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 6 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Tesla Inc CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and Tesla

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

The idea behind Intact Financial Corp and Tesla Inc 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.