Correlation Between FirstService Corp and CBRE Group

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

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

Diversification Opportunities for FirstService Corp and CBRE Group

0.41

Correlation Coefficient

FirstService Corp  CBRE Group

Very weak diversification

The 3 months correlation between FirstService and CBRE is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and CBRE Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE Group Class 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 CBRE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE Group Class has no effect on the direction of FirstService Corp i.e., FirstService Corp and CBRE Group go up and down completely randomly.

Pair Corralation between FirstService Corp and CBRE Group

Considering the 90-day investment horizon FirstService Corp is expected to under-perform the CBRE Group. But the stock apears to be less risky and, when comparing its historical volatility, FirstService Corp is 1.5 times less risky than CBRE Group. The stock trades about -0.1 of its potential returns per unit of risk. The CBRE Group Class is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,027  in CBRE Group Class on December 29, 2024 and sell it today you would lose (81.00) from holding CBRE Group Class or give up 0.62% of portfolio value over 90 days.

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

FirstService Corp  vs.  CBRE Group Class

FirstService Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FirstService Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

CBRE Group Class

Risk-Adjusted Performance

Very Weak

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

Pair Trading with FirstService Corp and CBRE Group

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

The idea behind FirstService Corp and CBRE Group Class 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.