Correlation Between IGM Financial and Canadian Life
Can any of the company-specific risk be diversified away by investing in both IGM Financial and Canadian Life 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 Canadian Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGM Financial and Canadian Life Companies, you can compare the effects of market volatilities on IGM Financial and Canadian Life 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 Canadian Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGM Financial and Canadian Life.
Diversification Opportunities for IGM Financial and Canadian Life
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IGM and Canadian is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies 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 Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of IGM Financial i.e., IGM Financial and Canadian Life go up and down completely randomly.
Pair Corralation between IGM Financial and Canadian Life
Assuming the 90 days trading horizon IGM Financial is expected to generate 3.17 times more return on investment than Canadian Life. However, IGM Financial is 3.17 times more volatile than Canadian Life Companies. It trades about 0.23 of its potential returns per unit of risk. Canadian Life Companies is currently generating about 0.19 per unit of risk. If you would invest 4,002 in IGM Financial on September 24, 2024 and sell it today you would earn a total of 623.00 from holding IGM Financial or generate 15.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
IGM Financial vs. Canadian Life Companies
Performance |
Timeline |
IGM Financial |
Canadian Life Companies |
IGM Financial and Canadian Life Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IGM Financial and Canadian Life
The main advantage of trading using opposite IGM Financial and Canadian Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGM Financial position performs unexpectedly, Canadian Life 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 Canadian Life will offset losses from the drop in Canadian Life's long position.IGM Financial vs. Berkshire Hathaway CDR | IGM Financial vs. JPMorgan Chase Co | IGM Financial vs. Bank of America | IGM Financial vs. Alphabet Inc CDR |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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