Correlation Between Crombie Real and FirstService Corp

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

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

Diversification Opportunities for Crombie Real and FirstService Corp

-0.83

Correlation Coefficient

Crombie Real  FirstService Corp

Pay attention - limited upside

The 3 months correlation between Crombie and FirstService is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Crombie Real Estate and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp and Crombie Real 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 Crombie Real Estate 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 Crombie Real i.e., Crombie Real and FirstService Corp go up and down completely randomly.

Pair Corralation between Crombie Real and FirstService Corp

Assuming the 90 days trading horizon Crombie Real Estate is expected to under-perform the FirstService Corp. But the stock apears to be less risky and, when comparing its historical volatility, Crombie Real Estate is 1.05 times less risky than FirstService Corp. The stock trades about -0.17 of its potential returns per unit of risk. The FirstService Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  24,693  in FirstService Corp on September 13, 2024 and sell it today you would earn a total of  2,420  from holding FirstService Corp or generate 9.8% return on investment over 90 days.

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

Crombie Real Estate  vs.  FirstService Corp

Crombie Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

FirstService Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crombie Real and FirstService Corp

The main advantage of trading using opposite Crombie Real and FirstService Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crombie Real 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 Crombie Real Estate 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.