Correlation Between Pacific Imperial and US Financial

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

By analyzing existing cross correlation between Pacific Imperial Mines and US Financial 15, you can compare the effects of market volatilities on Pacific Imperial and US Financial 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 Pacific Imperial with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Imperial and US Financial.

Diversification Opportunities for Pacific Imperial and US Financial

0.21

Correlation Coefficient

Pacific Imperial  US Financial

Modest diversification

The 3 months correlation between Pacific and FTU is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Imperial Mines and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Pacific Imperial 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 Pacific Imperial Mines are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Pacific Imperial i.e., Pacific Imperial and US Financial go up and down completely randomly.

Pair Corralation between Pacific Imperial and US Financial

Assuming the 90 days horizon Pacific Imperial Mines is expected to generate 2.64 times more return on investment than US Financial. However, Pacific Imperial is 2.64 times more volatile than US Financial 15. It trades about 0.15 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.15 per unit of risk. If you would invest  0.50  in Pacific Imperial Mines on October 22, 2024 and sell it today you would earn a total of  0.50  from holding Pacific Imperial Mines or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Pacific Imperial Mines  vs.  US Financial 15

Pacific Imperial Mines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Imperial Mines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Pacific Imperial showed solid returns over the last few months and may actually be approaching a breakup point.

US Financial 15

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, US Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacific Imperial and US Financial

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

The idea behind Pacific Imperial Mines and US Financial 15 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.