Correlation Between Firm Capital and Yerbae Brands

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

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

Diversification Opportunities for Firm Capital and Yerbae Brands

-0.36

Correlation Coefficient

Firm Capital  Yerbae Brands

Very good diversification

The 3 months correlation between Firm and Yerbae is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and Yerbae Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yerbae Brands Corp and Firm 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 Firm Capital Mortgage are associated (or correlated) with Yerbae Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yerbae Brands Corp has no effect on the direction of Firm Capital i.e., Firm Capital and Yerbae Brands go up and down completely randomly.

Pair Corralation between Firm Capital and Yerbae Brands

Assuming the 90 days horizon Firm Capital is expected to generate 1.94 times less return on investment than Yerbae Brands. But when comparing it to its historical volatility, Firm Capital Mortgage is 11.41 times less risky than Yerbae Brands. It trades about 0.13 of its potential returns per unit of risk. Yerbae Brands Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Yerbae Brands Corp on September 22, 2024 and sell it today you would lose (2.00) from holding Yerbae Brands Corp or give up 14.29% of portfolio value over 90 days.

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

Firm Capital Mortgage  vs.  Yerbae Brands Corp

Firm Capital Mortgage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Firm Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Yerbae Brands Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yerbae Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Firm Capital and Yerbae Brands

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

The idea behind Firm Capital Mortgage and Yerbae Brands 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.