Correlation Between Income Financial and Richelieu Hardware

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

Diversification Opportunities for Income Financial and Richelieu Hardware

0.79

Correlation Coefficient

Income Financial  Richelieu Hardware

Poor diversification

The 3 months correlation between Income and Richelieu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware 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 Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Income Financial i.e., Income Financial and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Income Financial and Richelieu Hardware

Assuming the 90 days trading horizon Income Financial Trust is expected to generate 0.95 times more return on investment than Richelieu Hardware. However, Income Financial Trust is 1.05 times less risky than Richelieu Hardware. It trades about 0.01 of its potential returns per unit of risk. Richelieu Hardware is currently generating about -0.12 per unit of risk. If you would invest  850.00  in Income Financial Trust on December 25, 2024 and sell it today you would lose (1.00) from holding Income Financial Trust or give up 0.12% of portfolio value over 90 days.

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

Income Financial Trust  vs.  Richelieu Hardware

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.

Richelieu Hardware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Income Financial and Richelieu Hardware

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

The idea behind Income Financial Trust and Richelieu Hardware 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.