Correlation Between Firstrand and Exemplar REITail

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

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

Diversification Opportunities for Firstrand and Exemplar REITail

-0.56

Correlation Coefficient

Firstrand  Exemplar REITail

Excellent diversification

The 3 months correlation between Firstrand and Exemplar is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Exemplar REITail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exemplar REITail and Firstrand 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 Firstrand are associated (or correlated) with Exemplar REITail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exemplar REITail has no effect on the direction of Firstrand i.e., Firstrand and Exemplar REITail go up and down completely randomly.

Pair Corralation between Firstrand and Exemplar REITail

Assuming the 90 days trading horizon Firstrand is expected to generate 149.91 times less return on investment than Exemplar REITail. But when comparing it to its historical volatility, Firstrand is 68.11 times less risky than Exemplar REITail. It trades about 0.04 of its potential returns per unit of risk. Exemplar REITail is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,126  in Exemplar REITail on October 23, 2024 and sell it today you would earn a total of  120,074  from holding Exemplar REITail or generate 10663.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Firstrand  vs.  Exemplar REITail

Firstrand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firstrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Exemplar REITail

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exemplar REITail are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Exemplar REITail exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Firstrand and Exemplar REITail

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

The idea behind Firstrand and Exemplar REITail 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..