Correlation Between Choice Properties and Firm Capital

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

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

Diversification Opportunities for Choice Properties and Firm Capital

-0.02

Correlation Coefficient

Choice Properties  Firm Capital

Good diversification

The 3 months correlation between Choice and Firm is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Choice Properties Real 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 Choice Properties 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 Choice Properties Real 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 Choice Properties i.e., Choice Properties and Firm Capital go up and down completely randomly.

Pair Corralation between Choice Properties and Firm Capital

Assuming the 90 days horizon Choice Properties Real is expected to under-perform the Firm Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, Choice Properties Real is 1.3 times less risky than Firm Capital. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Firm Capital Property is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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	90.63%
Values	Daily Returns

Choice Properties Real  vs.  Firm Capital Property

Choice Properties Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choice Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Firm Capital Property

Risk-Adjusted Performance

3 of 100

Insignificant

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 Choice Properties and Firm Capital

The main advantage of trading using opposite Choice Properties and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Properties 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 Choice Properties Real 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.