Correlation Between Income Financial and Pacific Imperial

Can any of the company-specific risk be diversified away by investing in both Income 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 Income 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 Income Financial Trust and Pacific Imperial Mines, you can compare the effects of market volatilities on Income 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 Income Financial with a short position of Pacific Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Financial and Pacific Imperial.

Diversification Opportunities for Income Financial and Pacific Imperial

0.08

Correlation Coefficient

Income Financial  Pacific Imperial

Significant diversification

The 3 months correlation between Income and Pacific is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust 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 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 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 Income Financial i.e., Income Financial and Pacific Imperial go up and down completely randomly.

Pair Corralation between Income Financial and Pacific Imperial

Assuming the 90 days trading horizon Income Financial Trust is expected to under-perform the Pacific Imperial. But the stock apears to be less risky and, when comparing its historical volatility, Income Financial Trust is 12.32 times less risky than Pacific Imperial. The stock trades about -0.05 of its potential returns per unit of risk. The Pacific Imperial Mines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Pacific Imperial Mines on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Pacific Imperial Mines or generate 0.0% return on investment over 90 days.

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

Income Financial Trust  vs.  Pacific Imperial Mines

Income Financial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Financial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Income Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pacific Imperial Mines

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Imperial Mines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Imperial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Income Financial and Pacific Imperial

The main advantage of trading using opposite Income Financial and Pacific Imperial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income 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 Income Financial Trust 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.