Correlation Between Intact Financial and Freedom Bank

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

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

Diversification Opportunities for Intact Financial and Freedom Bank

0.18

Correlation Coefficient

Intact Financial  Freedom Bank

Average diversification

The 3 months correlation between Intact and Freedom is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Intact Financial i.e., Intact Financial and Freedom Bank go up and down completely randomly.

Pair Corralation between Intact Financial and Freedom Bank

Assuming the 90 days horizon Intact Financial is expected to generate 1.2 times more return on investment than Freedom Bank. However, Intact Financial is 1.2 times more volatile than Freedom Bank of. It trades about 0.05 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.05 per unit of risk. If you would invest  14,500  in Intact Financial on September 14, 2024 and sell it today you would earn a total of  4,100  from holding Intact Financial or generate 28.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.32%
Values	Daily Returns

Intact Financial  vs.  Freedom Bank of

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.

Freedom Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Freedom Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Intact Financial and Freedom Bank

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

The idea behind Intact Financial and Freedom Bank of 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.