Correlation Between Brightspire Capital and British Land

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

By analyzing existing cross correlation between Brightspire Capital and British Land, you can compare the effects of market volatilities on Brightspire Capital and British Land 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 Brightspire Capital with a short position of British Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightspire Capital and British Land.

Diversification Opportunities for Brightspire Capital and British Land

0.1

Correlation Coefficient

Brightspire Capital  British Land

Average diversification

The 3 months correlation between Brightspire and British is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brightspire Capital and British Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British Land and Brightspire 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 Brightspire Capital are associated (or correlated) with British Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British Land has no effect on the direction of Brightspire Capital i.e., Brightspire Capital and British Land go up and down completely randomly.

Pair Corralation between Brightspire Capital and British Land

Given the investment horizon of 90 days Brightspire Capital is expected to generate 1.49 times less return on investment than British Land. But when comparing it to its historical volatility, Brightspire Capital is 1.03 times less risky than British Land. It trades about 0.07 of its potential returns per unit of risk. British Land is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  482.00  in British Land on September 2, 2024 and sell it today you would earn a total of  87.00  from holding British Land or generate 18.05% return on investment over 90 days.

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

Brightspire Capital  vs.  British Land

Brightspire Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brightspire Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Brightspire Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

British Land

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British Land are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, British Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brightspire Capital and British Land

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

The idea behind Brightspire Capital and British Land 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.