Correlation Between IGM Financial and Economic Investment

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

By analyzing existing cross correlation between IGM Financial and Economic Investment Trust, you can compare the effects of market volatilities on IGM Financial and Economic Investment 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 IGM Financial with a short position of Economic Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGM Financial and Economic Investment.

Diversification Opportunities for IGM Financial and Economic Investment

0.7

Correlation Coefficient

IGM Financial  Economic Investment

Poor diversification

The 3 months correlation between IGM and Economic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and Economic Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Economic Investment Trust and IGM 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 IGM Financial are associated (or correlated) with Economic Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Economic Investment Trust has no effect on the direction of IGM Financial i.e., IGM Financial and Economic Investment go up and down completely randomly.

Pair Corralation between IGM Financial and Economic Investment

Assuming the 90 days trading horizon IGM Financial is expected to generate 1.23 times less return on investment than Economic Investment. In addition to that, IGM Financial is 1.31 times more volatile than Economic Investment Trust. It trades about 0.06 of its total potential returns per unit of risk. Economic Investment Trust is currently generating about 0.09 per unit of volatility. If you would invest  11,278  in Economic Investment Trust on September 24, 2024 and sell it today you would earn a total of  5,122  from holding Economic Investment Trust or generate 45.42% return on investment over 90 days.

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

IGM Financial  vs.  Economic Investment Trust

IGM Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, IGM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Economic Investment Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IGM Financial and Economic Investment

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

The idea behind IGM Financial and Economic Investment Trust 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.