Correlation Between Armada Hoffler and Brightspire Capital

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

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

Diversification Opportunities for Armada Hoffler and Brightspire Capital

0.72

Correlation Coefficient

Armada Hoffler  Brightspire Capital

Poor diversification

The 3 months correlation between Armada and Brightspire is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hoffler Properties and Brightspire Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightspire Capital and Armada Hoffler 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 Armada Hoffler Properties are associated (or correlated) with Brightspire Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightspire Capital has no effect on the direction of Armada Hoffler i.e., Armada Hoffler and Brightspire Capital go up and down completely randomly.

Pair Corralation between Armada Hoffler and Brightspire Capital

Assuming the 90 days trading horizon Armada Hoffler Properties is expected to under-perform the Brightspire Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, Armada Hoffler Properties is 1.34 times less risky than Brightspire Capital. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Brightspire Capital is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  605.00  in Brightspire Capital on November 19, 2024 and sell it today you would lose (8.00) from holding Brightspire Capital or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Armada Hoffler Properties  vs.  Brightspire Capital

Armada Hoffler Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armada Hoffler Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Armada Hoffler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brightspire Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brightspire Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Brightspire Capital is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Armada Hoffler and Brightspire Capital

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

The idea behind Armada Hoffler Properties and Brightspire Capital 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.