Correlation Between Storage Vault and TMX Group

Can any of the company-specific risk be diversified away by investing in both Storage Vault and TMX Group 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 Storage Vault and TMX Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Storage Vault Canada and TMX Group Limited, you can compare the effects of market volatilities on Storage Vault and TMX Group 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 Storage Vault with a short position of TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Storage Vault and TMX Group.

Diversification Opportunities for Storage Vault and TMX Group

-0.69

Correlation Coefficient

Storage Vault  TMX Group

Excellent diversification

The 3 months correlation between Storage and TMX is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Storage Vault Canada and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited and Storage Vault 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 Storage Vault Canada are associated (or correlated) with TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Storage Vault i.e., Storage Vault and TMX Group go up and down completely randomly.

Pair Corralation between Storage Vault and TMX Group

Assuming the 90 days trading horizon Storage Vault Canada is expected to under-perform the TMX Group. In addition to that, Storage Vault is 2.42 times more volatile than TMX Group Limited. It trades about -0.13 of its total potential returns per unit of risk. TMX Group Limited is currently generating about 0.08 per unit of volatility. If you would invest  4,251  in TMX Group Limited on September 2, 2024 and sell it today you would earn a total of  176.00  from holding TMX Group Limited or generate 4.14% return on investment over 90 days.

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

Storage Vault Canada  vs.  TMX Group Limited

Storage Vault Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Storage Vault Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

TMX Group Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TMX Group is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Storage Vault and TMX Group

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

The idea behind Storage Vault Canada and TMX Group Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.