Correlation Between Prime Financial and Indiana Resources

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

By analyzing existing cross correlation between Prime Financial Group and Indiana Resources, you can compare the effects of market volatilities on Prime Financial and Indiana 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 Prime Financial with a short position of Indiana Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and Indiana Resources.

Diversification Opportunities for Prime Financial and Indiana Resources

0.63

Correlation Coefficient

Prime Financial  Indiana Resources

Poor diversification

The 3 months correlation between Prime and Indiana is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and Indiana Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indiana Resources and Prime 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 Prime Financial Group are associated (or correlated) with Indiana Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indiana Resources has no effect on the direction of Prime Financial i.e., Prime Financial and Indiana Resources go up and down completely randomly.

Pair Corralation between Prime Financial and Indiana Resources

Assuming the 90 days trading horizon Prime Financial is expected to generate 3.37 times less return on investment than Indiana Resources. In addition to that, Prime Financial is 1.43 times more volatile than Indiana Resources. It trades about 0.04 of its total potential returns per unit of risk. Indiana Resources is currently generating about 0.19 per unit of volatility. If you would invest  6.10  in Indiana Resources on December 29, 2024 and sell it today you would earn a total of  1.70  from holding Indiana Resources or generate 27.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Prime Financial Group  vs.  Indiana Resources

Prime Financial Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Prime Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Indiana Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indiana Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indiana Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Financial and Indiana Resources

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

The idea behind Prime Financial Group and Indiana Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.