Correlation Between Income Financial and Terreno Resources

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

Diversification Opportunities for Income Financial and Terreno Resources

-0.46

Correlation Coefficient

Income Financial  Terreno Resources

Very good diversification

The 3 months correlation between Income and Terreno is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Terreno Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Resources Corp 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 Terreno Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Resources Corp has no effect on the direction of Income Financial i.e., Income Financial and Terreno Resources go up and down completely randomly.

Pair Corralation between Income Financial and Terreno Resources

Assuming the 90 days trading horizon Income Financial Trust is expected to under-perform the Terreno Resources. But the stock apears to be less risky and, when comparing its historical volatility, Income Financial Trust is 31.37 times less risky than Terreno Resources. The stock trades about -0.26 of its potential returns per unit of risk. The Terreno Resources Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Terreno Resources Corp on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Terreno Resources Corp or generate 100.0% return on investment over 90 days.

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

Income Financial Trust  vs.  Terreno Resources Corp

Income Financial Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 9 (%) 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 February 2025.

Terreno Resources Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Terreno Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Terreno Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Income Financial and Terreno Resources

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

The idea behind Income Financial Trust and Terreno Resources Corp 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.