Correlation Between TFI International and Savaria

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

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

Diversification Opportunities for TFI International and Savaria

-0.2

Correlation Coefficient

TFI International  Savaria

Good diversification

The 3 months correlation between TFI and Savaria is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Savaria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savaria and TFI International 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 TFI International are associated (or correlated) with Savaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savaria has no effect on the direction of TFI International i.e., TFI International and Savaria go up and down completely randomly.

Pair Corralation between TFI International and Savaria

Assuming the 90 days trading horizon TFI International is expected to generate 1.07 times more return on investment than Savaria. However, TFI International is 1.07 times more volatile than Savaria. It trades about 0.09 of its potential returns per unit of risk. Savaria is currently generating about 0.05 per unit of risk. If you would invest  19,097  in TFI International on September 5, 2024 and sell it today you would earn a total of  2,153  from holding TFI International or generate 11.27% return on investment over 90 days.

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

TFI International  vs.  Savaria

TFI International

Risk-Adjusted Performance

7 of 100

OK

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

Savaria

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Savaria are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Savaria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TFI International and Savaria

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

The idea behind TFI International and Savaria 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.