Correlation Between Income Financial and Brompton Lifeco

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

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

Diversification Opportunities for Income Financial and Brompton Lifeco

0.92

Correlation Coefficient

Income Financial  Brompton Lifeco

Almost no diversification

The 3 months correlation between Income and Brompton is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Brompton Lifeco Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Lifeco Split and Income 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 Income Financial Trust are associated (or correlated) with Brompton Lifeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Lifeco Split has no effect on the direction of Income Financial i.e., Income Financial and Brompton Lifeco go up and down completely randomly.

Pair Corralation between Income Financial and Brompton Lifeco

Assuming the 90 days trading horizon Income Financial is expected to generate 2.51 times less return on investment than Brompton Lifeco. But when comparing it to its historical volatility, Income Financial Trust is 1.35 times less risky than Brompton Lifeco. It trades about 0.15 of its potential returns per unit of risk. Brompton Lifeco Split is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Brompton Lifeco Split on September 4, 2024 and sell it today you would earn a total of  257.00  from holding Brompton Lifeco Split or generate 33.77% return on investment over 90 days.

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

Income Financial Trust  vs.  Brompton Lifeco Split

Income Financial Trust

Risk-Adjusted Performance

11 of 100

Good

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

Brompton Lifeco Split

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Lifeco Split are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Lifeco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Income Financial and Brompton Lifeco

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

The idea behind Income Financial Trust and Brompton Lifeco Split 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.