Correlation Between TMX Group and SIR Royalty

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

Diversification Opportunities for TMX Group and SIR Royalty

0.61

Correlation Coefficient

TMX Group  SIR Royalty

Poor diversification

The 3 months correlation between TMX and SIR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income 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 SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of TMX Group i.e., TMX Group and SIR Royalty go up and down completely randomly.

Pair Corralation between TMX Group and SIR Royalty

Given the investment horizon of 90 days TMX Group is expected to generate 2.1 times less return on investment than SIR Royalty. In addition to that, TMX Group is 1.14 times more volatile than SIR Royalty Income. It trades about 0.06 of its total potential returns per unit of risk. SIR Royalty Income is currently generating about 0.14 per unit of volatility. If you would invest  1,271  in SIR Royalty Income on April 24, 2025 and sell it today you would earn a total of  130.00  from holding SIR Royalty Income or generate 10.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

TMX Group Limited  vs.  SIR Royalty Income

TMX Group Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 4 (%) 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.

SIR Royalty Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIR Royalty may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with TMX Group and SIR Royalty

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

The idea behind TMX Group Limited and SIR Royalty Income 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 CEOs Directory module to screen CEOs from public companies around the world.