Correlation Between Income Financial and Canadian Utilities

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

Diversification Opportunities for Income Financial and Canadian Utilities

-0.62

Correlation Coefficient

Income Financial  Canadian Utilities

Excellent diversification

The 3 months correlation between Income and Canadian is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Income Financial i.e., Income Financial and Canadian Utilities go up and down completely randomly.

Pair Corralation between Income Financial and Canadian Utilities

Assuming the 90 days trading horizon Income Financial Trust is expected to generate 1.82 times more return on investment than Canadian Utilities. However, Income Financial is 1.82 times more volatile than Canadian Utilities Ltd. It trades about 0.13 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about -0.01 per unit of risk. If you would invest  776.00  in Income Financial Trust on September 26, 2024 and sell it today you would earn a total of  80.00  from holding Income Financial Trust or generate 10.31% return on investment over 90 days.

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

Income Financial Trust  vs.  Canadian Utilities Ltd

Income Financial Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 10 (%) 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 January 2025.

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Income Financial and Canadian Utilities

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

The idea behind Income Financial Trust and Canadian Utilities Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.