Correlation Between Firm Capital and Retail Opportunity

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

By analyzing existing cross correlation between Firm Capital Property and Retail Opportunity Investments, you can compare the effects of market volatilities on Firm Capital and Retail Opportunity 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 Retail Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and Retail Opportunity.

Diversification Opportunities for Firm Capital and Retail Opportunity

0.76

Correlation Coefficient

Firm Capital  Retail Opportunity

Poor diversification

The 3 months correlation between Firm and Retail is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Property and Retail Opportunity Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Opportunity 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 Property are associated (or correlated) with Retail Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Opportunity has no effect on the direction of Firm Capital i.e., Firm Capital and Retail Opportunity go up and down completely randomly.

Pair Corralation between Firm Capital and Retail Opportunity

Assuming the 90 days horizon Firm Capital Property is expected to generate 15.23 times more return on investment than Retail Opportunity. However, Firm Capital is 15.23 times more volatile than Retail Opportunity Investments. It trades about 0.07 of its potential returns per unit of risk. Retail Opportunity Investments is currently generating about 0.19 per unit of risk. If you would invest  381.00  in Firm Capital Property on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Firm Capital Property or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	51.61%
Values	Daily Returns

Firm Capital Property  vs.  Retail Opportunity Investments

Firm Capital Property

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Firm Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Retail Opportunity

Risk-Adjusted Performance

Good

Over the last 90 days Retail Opportunity Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Retail Opportunity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Firm Capital and Retail Opportunity

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

The idea behind Firm Capital Property and Retail Opportunity Investments 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.