Axioma Risk Monitor
Equity edition

Canada: the least risky country; Canadian Profitability tanks; Loonie among the winners

We are excited to introduce Axioma’s new Canada Equity Risk Model (CA4) into the Canada Equity Risk Monitor. For more details on this new model, please click here.



Canada: the least risky country


As stock markets wavered last week, Canada remained the least risky among all geographies Axioma follows closely. Short-horizon risk climbed in Canada for the past month, following the global trend, but even with the 100-basis-point jump in risk last week, Canada’s volatility was the lowest among all of Axioma’s local short-horizon fundamental model forecasts. The TSX Composite’s volatility of 9%, as measured by the short-horizon fundamental variant of Axioma’s newly released Canada model (CN4), was almost 4 percentage points lower than that of Australia’s ASX 200 and FTSE Developed Europe—the second least-risky benchmarks. China’s CSI 300 risk of 18% was double that of Canada. China was the most volatile among all geographies Axioma tracks closely.

Interestingly, the risk spreads between the statistical and fundamental variants of the CN4 model became strongly positive in August at both short- and medium-horizons, indicating potential changes in the risk regime and/or the emergence of non-traditional factor risk sources in Canada.

See graph from the Canada Equity Risk Monitor as of 29 August 2019:


Canadian Profitability tanks


Profitability, one of the new factors in Axioma’s upgraded CA4 model, posted losses at the one-week and one-, three-, and six-month horizons. Profitability’s six-month cumulative return of -3% in Canada was the lowest across all of Axioma’s medium-horizon fundamental models that include a Profitability factor. Profitability recorded positive six-month cumulative returns in most other regions Axioma tracks closely, with the exception of the US and Australia.

In contrast to the volatility of the Canadian market as a whole, which as noted above is the lowest among its peers, the volatility of the style factors in the Canadian model tends to be higher than in most other developed regions for which Axioma has models. The realized annualized volatility for Profitability is more than one percentage point higher than the next-highest region—Australia. For more insights about the Canadian style factor volatility, please see blog post Uh-Oh, Canada: Canadian Style Factors Show High Volatility.

See graph from the Canada Equity Risk Monitor as of 29 August 2019:



Loonie among the winners


The Canadian dollar (a.k.a. the “loonie,” named after the bird (common loon) on Canada’s one-dollar coin) is among the few major developed currencies to post a positive six-month return against the greenback. Only the Japanese yen, a safe-haven currency, posted higher returns than the Canadian dollar. The yen reported a six-month gain of nearly 4%, close to the high-end of its six-month return range against the US dollar. The biggest looser against the greenback was the British pound, which reported a six-month loss of about 8%, amid Brexit-related fears.

The risk of the Canadian dollar rose in August, but the loonie remained one of the least volatile currencies among major developed currencies. At slightly above 5% volatility, as measured by the short-horizon Worldwide model, the Canadian dollar was located in the middle of its six-month volatility range against the US dollar. The loonie’s risk was only higher than that of two developed currencies: the euro and Singapore dollar. The riskiest developed currency as of last week was the Norwegian krone at 7.5%.

See graph from the Equity Risk Monitors as of 29 August 2019:



Stay Connected


Webinar Recording | Axioma Insight™ Q2 2019 Multi-Asset Risk Review

The constant change in market focus over the past months has led to a sharp decrease in cross-asset class correlations. Watch this webinar to learn more about how these different environments have affected the overall risk of multi-asset class portfolios.

Watch the recording here.

Axioma Financial Intelligence Summit: London 2019

Date: October 30, 2019

Join us in London for a full day of expert presenters, illuminating presentations and thought-provoking discussion.

Register here.

Axioma Financial Intelligence Summit: New York 2019

Date: November 20, 2019

Join us in New York for a full day of expert presenters, illuminating presentations and thought-provoking discussion.

Register here.


On the Blog

Is investor sentiment (a-a-achoo!) contagious?

We use the Axioma ROOF Scores to quantify investors’ expectations of the new PM in the run-up to his nomination, and the report card they have given him since.

Boris Johnson’s ROOF™ Report Card

In this post, we investigate whether Axioma’s ROOF scores give any credence to the old adage, “When Wall Street sneezes, all markets catch a cold.”

Axioma’s New Canada Model Adds Macroeconomic Sensitivities

We have added two other factors to the new model that reflect the unique composition of the Canadian economy: residual gold sensitivity and residual oil sensitivity.

Uh-Oh, Canada: Canadian Style Factors Show High Volatility

While Version 4 of our Canada model also showed some big differences between Canada and other markets, Canada stood out most in terms of factor volatility.

Latest Research

Is Your Smart Beta Product Scalable?

In this paper, we use the backtester capabilities of the Axioma Portfolio Optimizer to investigate the maximum capacity of a smart beta strategy, based on the Profitability factor in the Asia ex-Japan equity market.

In the News

CNBC: Risk appetite in the market is very low now, researcher says

CEOs are holding back on critical investments, says Olivier D’assier, head of applied research, APAC at Axioma.

Axioma Introduces New Canada Equity Risk Model

This release builds on the existing risk models, offering enhanced country-specific content to meet the risk-management needs of investors.

CNBC: Central banks might start going to an easing cycle, analyst says

Volatility is back and people have to deal with it, says Olivier D’assier, head of applied research, APAC at Axioma.

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