Correlation Between IGM Financial and Finning International

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

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

Diversification Opportunities for IGM Financial and Finning International

-0.64

Correlation Coefficient

IGM Financial  Finning International

Excellent diversification

The 3 months correlation between IGM and Finning is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and Finning International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finning International 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 Finning International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finning International has no effect on the direction of IGM Financial i.e., IGM Financial and Finning International go up and down completely randomly.

Pair Corralation between IGM Financial and Finning International

Assuming the 90 days trading horizon IGM Financial is expected to generate 0.47 times more return on investment than Finning International. However, IGM Financial is 2.11 times less risky than Finning International. It trades about 0.38 of its potential returns per unit of risk. Finning International is currently generating about -0.01 per unit of risk. If you would invest  3,859  in IGM Financial on September 15, 2024 and sell it today you would earn a total of  901.00  from holding IGM Financial or generate 23.35% return on investment over 90 days.

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

IGM Financial  vs.  Finning International

IGM Financial

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 29 (%) 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.

Finning International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finning International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Finning International 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 Finning International

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

The idea behind IGM Financial and Finning 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.

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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.