Correlation Between Financial and Pacific Imperial

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

By analyzing existing cross correlation between Financial 15 Split and Pacific Imperial Mines, you can compare the effects of market volatilities on Financial and Pacific Imperial 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 Financial with a short position of Pacific Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Pacific Imperial.

Diversification Opportunities for Financial and Pacific Imperial

0.03

Correlation Coefficient

Financial  Pacific Imperial

Significant diversification

The 3 months correlation between Financial and Pacific is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Pacific Imperial Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Imperial Mines and 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 Financial 15 Split are associated (or correlated) with Pacific Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Imperial Mines has no effect on the direction of Financial i.e., Financial and Pacific Imperial go up and down completely randomly.

Pair Corralation between Financial and Pacific Imperial

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.01 times more return on investment than Pacific Imperial. However, Financial 15 Split is 88.05 times less risky than Pacific Imperial. It trades about 0.4 of its potential returns per unit of risk. Pacific Imperial Mines is currently generating about -0.13 per unit of risk. If you would invest  1,050  in Financial 15 Split on October 5, 2024 and sell it today you would earn a total of  19.00  from holding Financial 15 Split or generate 1.81% return on investment over 90 days.

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

Financial 15 Split  vs.  Pacific Imperial Mines

Financial 15 Split

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacific Imperial Mines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Imperial Mines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pacific Imperial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Pacific Imperial

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

The idea behind Financial 15 Split and Pacific Imperial Mines 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.