Correlation Between TMX Group and Moodys

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

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

Diversification Opportunities for TMX Group and Moodys

0.12

Correlation Coefficient

TMX Group  Moodys

Average diversification

The 3 months correlation between TMX and Moodys is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys and TMX Group 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 TMX Group Limited are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of TMX Group i.e., TMX Group and Moodys go up and down completely randomly.

Pair Corralation between TMX Group and Moodys

Assuming the 90 days horizon TMX Group Limited is expected to under-perform the Moodys. But the pink sheet apears to be less risky and, when comparing its historical volatility, TMX Group Limited is 1.25 times less risky than Moodys. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Moodys is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  47,375  in Moodys on September 30, 2024 and sell it today you would earn a total of  301.00  from holding Moodys or generate 0.64% return on investment over 90 days.

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

TMX Group Limited  vs.  Moodys

TMX Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMX Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TMX Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Moodys

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with TMX Group and Moodys

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

The idea behind TMX Group Limited and Moodys 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.