Correlation Between Brightspire Capital and Modiv

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

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

Diversification Opportunities for Brightspire Capital and Modiv

0.35

Correlation Coefficient

Brightspire Capital  Modiv

Weak diversification

The 3 months correlation between Brightspire and Modiv is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Brightspire Capital and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc and Brightspire 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 Brightspire Capital are associated (or correlated) with Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of Brightspire Capital i.e., Brightspire Capital and Modiv go up and down completely randomly.

Pair Corralation between Brightspire Capital and Modiv

Given the investment horizon of 90 days Brightspire Capital is expected to generate 3.61 times less return on investment than Modiv. But when comparing it to its historical volatility, Brightspire Capital is 1.46 times less risky than Modiv. It trades about 0.03 of its potential returns per unit of risk. Modiv Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,465  in Modiv Inc on December 30, 2024 and sell it today you would earn a total of  111.00  from holding Modiv Inc or generate 7.58% return on investment over 90 days.

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

Brightspire Capital  vs.  Modiv Inc

Brightspire Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brightspire Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Modiv Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Modiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Brightspire Capital and Modiv

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

The idea behind Brightspire Capital and Modiv Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.