Correlation Between Intact Financial and TFI International

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

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

Diversification Opportunities for Intact Financial and TFI International

0.28

Correlation Coefficient

Intact Financial  TFI International

Modest diversification

The 3 months correlation between Intact and TFI is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 are associated (or correlated) with TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Intact Financial i.e., Intact Financial and TFI International go up and down completely randomly.

Pair Corralation between Intact Financial and TFI International

Assuming the 90 days trading horizon Intact Financial is expected to generate 2.14 times less return on investment than TFI International. But when comparing it to its historical volatility, Intact Financial is 2.12 times less risky than TFI International. It trades about 0.11 of its potential returns per unit of risk. TFI International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  19,355  in TFI International on September 12, 2024 and sell it today you would earn a total of  2,451  from holding TFI International or generate 12.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Intact Financial  vs.  TFI International

Intact Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Intact Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TFI International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TFI International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and TFI International

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

The idea behind Intact Financial and TFI International 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.