Correlation Between Income Financial and North American
Can any of the company-specific risk be diversified away by investing in both Income Financial and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Income Financial and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Financial and North American.
Diversification Opportunities for Income Financial and North American
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and North is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Income Financial i.e., Income Financial and North American go up and down completely randomly.
Pair Corralation between Income Financial and North American
Assuming the 90 days trading horizon Income Financial is expected to generate 1.28 times less return on investment than North American. But when comparing it to its historical volatility, Income Financial Trust is 1.78 times less risky than North American. It trades about 0.33 of its potential returns per unit of risk. North American Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 692.00 in North American Financial on August 31, 2024 and sell it today you would earn a total of 66.00 from holding North American Financial or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Financial Trust vs. North American Financial
Performance |
| Timeline |
| Income Financial Trust |
| North American Financial |
Income Financial and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Financial and North American
The main advantage of trading using opposite Income Financial and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Financial position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Income Financial vs. iShares Canadian HYBrid | Income Financial vs. Brompton European Dividend | Income Financial vs. Solar Alliance Energy | Income Financial vs. PHN Multi Style All Cap |
| North American vs. iShares Canadian HYBrid | North American vs. Brompton European Dividend | North American vs. Solar Alliance Energy | North American vs. PHN Multi Style All Cap |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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