Correlation Between Brightspire Capital and One Liberty

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

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

Diversification Opportunities for Brightspire Capital and One Liberty

0.78

Correlation Coefficient

Brightspire Capital  One Liberty

Poor diversification

The 3 months correlation between Brightspire and One is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Brightspire Capital and One Liberty Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Liberty Properties 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 One Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Liberty Properties has no effect on the direction of Brightspire Capital i.e., Brightspire Capital and One Liberty go up and down completely randomly.

Pair Corralation between Brightspire Capital and One Liberty

Given the investment horizon of 90 days Brightspire Capital is expected to generate 1.15 times more return on investment than One Liberty. However, Brightspire Capital is 1.15 times more volatile than One Liberty Properties. It trades about 0.01 of its potential returns per unit of risk. One Liberty Properties is currently generating about -0.15 per unit of risk. If you would invest  616.00  in Brightspire Capital on November 28, 2024 and sell it today you would lose (1.00) from holding Brightspire Capital or give up 0.16% of portfolio value over 90 days.

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

Brightspire Capital  vs.  One Liberty Properties

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.

One Liberty Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Liberty Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Brightspire Capital and One Liberty

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

The idea behind Brightspire Capital and One Liberty Properties 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.