Correlation Between British Land and Firm Capital

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

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

Diversification Opportunities for British Land and Firm Capital

-0.13

Correlation Coefficient

British Land  Firm Capital

Good diversification

The 3 months correlation between British and Firm is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding British Land and Firm Capital Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Property and British Land 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 British Land are associated (or correlated) with Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Property has no effect on the direction of British Land i.e., British Land and Firm Capital go up and down completely randomly.

Pair Corralation between British Land and Firm Capital

Assuming the 90 days horizon British Land is expected to under-perform the Firm Capital. In addition to that, British Land is 1.09 times more volatile than Firm Capital Property. It trades about -0.21 of its total potential returns per unit of risk. Firm Capital Property is currently generating about 0.04 per unit of volatility. If you would invest  380.00  in Firm Capital Property on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Firm Capital Property or generate 3.68% return on investment over 90 days.

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

British Land  vs.  Firm Capital Property

British Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days British Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Firm Capital Property

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Firm Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with British Land and Firm Capital

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

The idea behind British Land and Firm Capital Property 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.