Correlation Between Income Financial and Canadian Life

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

Diversification Opportunities for Income Financial and Canadian Life

0.89

Correlation Coefficient

Income Financial  Canadian Life

Very poor diversification

The 3 months correlation between Income and Canadian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies 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 Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Income Financial i.e., Income Financial and Canadian Life go up and down completely randomly.

Pair Corralation between Income Financial and Canadian Life

Assuming the 90 days trading horizon Income Financial is expected to generate 2.01 times less return on investment than Canadian Life. But when comparing it to its historical volatility, Income Financial Trust is 1.26 times less risky than Canadian Life. It trades about 0.17 of its potential returns per unit of risk. Canadian Life Companies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  538.00  in Canadian Life Companies on September 12, 2024 and sell it today you would earn a total of  169.00  from holding Canadian Life Companies or generate 31.41% return on investment over 90 days.

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

Income Financial Trust  vs.  Canadian Life Companies

Income Financial Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Income Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Canadian Life Companies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Life Companies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canadian Life displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Income Financial and Canadian Life

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

The idea behind Income Financial Trust and Canadian Life Companies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.