Correlation Between Pacific Capital and Infrastructure Fund

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

By analyzing existing cross correlation between Pacific Capital Tax Free and Infrastructure Fund Retail, you can compare the effects of market volatilities on Pacific Capital and Infrastructure Fund 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 Capital with a short position of Infrastructure Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Capital and Infrastructure Fund.

Diversification Opportunities for Pacific Capital and Infrastructure Fund

0.72

Correlation Coefficient

Pacific Capital  Infrastructure Fund

Poor diversification

The 3 months correlation between Pacific and Infrastructure is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Capital Tax Free and Infrastructure Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infrastructure Fund and Pacific Capital 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 Capital Tax Free are associated (or correlated) with Infrastructure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infrastructure Fund has no effect on the direction of Pacific Capital i.e., Pacific Capital and Infrastructure Fund go up and down completely randomly.

Pair Corralation between Pacific Capital and Infrastructure Fund

Assuming the 90 days horizon Pacific Capital is expected to generate 18.0 times less return on investment than Infrastructure Fund. But when comparing it to its historical volatility, Pacific Capital Tax Free is 1.65 times less risky than Infrastructure Fund. It trades about 0.0 of its potential returns per unit of risk. Infrastructure Fund Retail is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,369  in Infrastructure Fund Retail on September 14, 2024 and sell it today you would earn a total of  2.00  from holding Infrastructure Fund Retail or generate 0.08% return on investment over 90 days.

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

Pacific Capital Tax Free  vs.  Infrastructure Fund Retail

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Pacific Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Infrastructure Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastructure Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Infrastructure Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pacific Capital and Infrastructure Fund

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

The idea behind Pacific Capital Tax Free and Infrastructure Fund Retail 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 Global Correlations module to find global opportunities by holding instruments from different markets.