Correlation Between Intact Financial and Canada Rare

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

By analyzing existing cross correlation between Intact Financial Corp and Canada Rare Earth, you can compare the effects of market volatilities on Intact Financial and Canada Rare 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 Intact Financial with a short position of Canada Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intact Financial and Canada Rare.

Diversification Opportunities for Intact Financial and Canada Rare

0.06

Correlation Coefficient

Intact Financial  Canada Rare

Significant diversification

The 3 months correlation between Intact and Canada is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial Corp and Canada Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Rare Earth and Intact 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 Intact Financial Corp are associated (or correlated) with Canada Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Rare Earth has no effect on the direction of Intact Financial i.e., Intact Financial and Canada Rare go up and down completely randomly.

Pair Corralation between Intact Financial and Canada Rare

Assuming the 90 days trading horizon Intact Financial is expected to generate 21.14 times less return on investment than Canada Rare. But when comparing it to its historical volatility, Intact Financial Corp is 39.06 times less risky than Canada Rare. It trades about 0.24 of its potential returns per unit of risk. Canada Rare Earth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Canada Rare Earth on February 27, 2024 and sell it today you would earn a total of  0.00  from holding Canada Rare Earth or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Intact Financial Corp  vs.  Canada Rare Earth

Intact Financial Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Intact Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Canada Rare Earth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Rare Earth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canada Rare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and Canada Rare

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

The idea behind Intact Financial Corp and Canada Rare Earth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.