Correlation Between Firm Capital and British Land

Can any of the company-specific risk be diversified away by investing in both Firm 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 Firm 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 Firm Capital Property and British Land, you can compare the effects of market volatilities on Firm 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 Firm Capital with a short position of British Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and British Land.

Diversification Opportunities for Firm Capital and British Land

-0.18

Correlation Coefficient

Firm Capital  British Land

Good diversification

The 3 months correlation between Firm and British is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Property and British Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British Land and Firm 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 Firm Capital Property 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 Firm Capital i.e., Firm Capital and British Land go up and down completely randomly.

Pair Corralation between Firm Capital and British Land

Assuming the 90 days horizon Firm Capital Property is expected to generate 24.14 times more return on investment than British Land. However, Firm Capital is 24.14 times more volatile than British Land. It trades about 0.05 of its potential returns per unit of risk. British Land is currently generating about 0.0 per unit of risk. If you would invest  320.00  in Firm Capital Property on September 12, 2024 and sell it today you would earn a total of  85.00  from holding Firm Capital Property or generate 26.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Firm Capital Property  vs.  British Land

Firm Capital Property

Risk-Adjusted Performance

5 of 100

Modest

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

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.

Pair Trading with Firm Capital and British Land

The main advantage of trading using opposite Firm Capital and British Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firm 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 Firm Capital Property 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.