Correlation Between TMX Group and Canadian Tire

Can any of the company-specific risk be diversified away by investing in both TMX Group and Canadian Tire 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 Canadian Tire 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 Canadian Tire, you can compare the effects of market volatilities on TMX Group and Canadian Tire 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 Canadian Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX Group and Canadian Tire.

Diversification Opportunities for TMX Group and Canadian Tire

-0.47

Correlation Coefficient

TMX Group  Canadian Tire

Very good diversification

The 3 months correlation between TMX and Canadian is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and Canadian Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Tire 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 Canadian Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Tire has no effect on the direction of TMX Group i.e., TMX Group and Canadian Tire go up and down completely randomly.

Pair Corralation between TMX Group and Canadian Tire

Given the investment horizon of 90 days TMX Group Limited is expected to generate 0.76 times more return on investment than Canadian Tire. However, TMX Group Limited is 1.31 times less risky than Canadian Tire. It trades about 0.13 of its potential returns per unit of risk. Canadian Tire is currently generating about -0.01 per unit of risk. If you would invest  2,765  in TMX Group Limited on August 31, 2024 and sell it today you would earn a total of  1,675  from holding TMX Group Limited or generate 60.58% return on investment over 90 days.

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

TMX Group Limited  vs.  Canadian Tire

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 recent stock price disarray, may contribute to short-term losses for the investors.

Canadian Tire

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Tire are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Tire is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TMX Group and Canadian Tire

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

The idea behind TMX Group Limited and Canadian Tire 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.