Correlation Between Ritchie Bros and FirstService Corp

Can any of the company-specific risk be diversified away by investing in both Ritchie Bros and FirstService Corp 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 Ritchie Bros and FirstService Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ritchie Bros Auctioneers and FirstService Corp, you can compare the effects of market volatilities on Ritchie Bros and FirstService Corp 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 Ritchie Bros with a short position of FirstService Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritchie Bros and FirstService Corp.

Diversification Opportunities for Ritchie Bros and FirstService Corp

0.79

Correlation Coefficient

Ritchie Bros  FirstService Corp

Poor diversification

The 3 months correlation between Ritchie and FirstService is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp and Ritchie Bros 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 Ritchie Bros Auctioneers are associated (or correlated) with FirstService Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstService Corp has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and FirstService Corp go up and down completely randomly.

Pair Corralation between Ritchie Bros and FirstService Corp

Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to generate 1.5 times more return on investment than FirstService Corp. However, Ritchie Bros is 1.5 times more volatile than FirstService Corp. It trades about 0.21 of its potential returns per unit of risk. FirstService Corp is currently generating about 0.2 per unit of risk. If you would invest  11,391  in Ritchie Bros Auctioneers on September 2, 2024 and sell it today you would earn a total of  2,443  from holding Ritchie Bros Auctioneers or generate 21.45% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  FirstService Corp

Ritchie Bros Auctioneers

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

FirstService Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ritchie Bros and FirstService Corp

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

The idea behind Ritchie Bros Auctioneers and FirstService Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.