Correlation Between FirstService Corp and Morguard

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

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

Diversification Opportunities for FirstService Corp and Morguard

0.26

Correlation Coefficient

FirstService Corp  Morguard

Modest diversification

The 3 months correlation between FirstService and Morguard is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Morguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morguard and FirstService Corp 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 FirstService Corp are associated (or correlated) with Morguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morguard has no effect on the direction of FirstService Corp i.e., FirstService Corp and Morguard go up and down completely randomly.

Pair Corralation between FirstService Corp and Morguard

Assuming the 90 days trading horizon FirstService Corp is expected to generate 0.77 times more return on investment than Morguard. However, FirstService Corp is 1.29 times less risky than Morguard. It trades about 0.05 of its potential returns per unit of risk. Morguard is currently generating about -0.09 per unit of risk. If you would invest  25,596  in FirstService Corp on October 20, 2024 and sell it today you would earn a total of  768.00  from holding FirstService Corp or generate 3.0% return on investment over 90 days.

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

FirstService Corp  vs.  Morguard

FirstService Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FirstService Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Morguard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with FirstService Corp and Morguard

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

The idea behind FirstService Corp and Morguard 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 Global Correlations module to find global opportunities by holding instruments from different markets.