Correlation Between Topaz Energy and Intact Financial

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

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

Diversification Opportunities for Topaz Energy and Intact Financial

0.64

Correlation Coefficient

Topaz Energy  Intact Financial

Poor diversification

The 3 months correlation between Topaz and Intact is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Topaz Energy Corp and Intact Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial Corp and Topaz Energy 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 Topaz Energy Corp are associated (or correlated) with Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial Corp has no effect on the direction of Topaz Energy i.e., Topaz Energy and Intact Financial go up and down completely randomly.

Pair Corralation between Topaz Energy and Intact Financial

Assuming the 90 days trading horizon Topaz Energy is expected to generate 1.03 times less return on investment than Intact Financial. In addition to that, Topaz Energy is 1.35 times more volatile than Intact Financial Corp. It trades about 0.06 of its total potential returns per unit of risk. Intact Financial Corp is currently generating about 0.08 per unit of volatility. If you would invest  1,700  in Intact Financial Corp on August 10, 2024 and sell it today you would earn a total of  696.00  from holding Intact Financial Corp or generate 40.94% return on investment over 90 days.

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

Topaz Energy Corp  vs.  Intact Financial Corp

Topaz Energy Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Topaz Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Topaz Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Intact Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Topaz Energy and Intact Financial

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

The idea behind Topaz Energy Corp and Intact Financial Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.