Correlation Between FirstService Corp and Redfin Corp

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

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

Diversification Opportunities for FirstService Corp and Redfin Corp

-0.53

Correlation Coefficient

FirstService Corp  Redfin Corp

Excellent diversification

The 3 months correlation between FirstService and Redfin is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp 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 Redfin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redfin Corp has no effect on the direction of FirstService Corp i.e., FirstService Corp and Redfin Corp go up and down completely randomly.

Pair Corralation between FirstService Corp and Redfin Corp

Considering the 90-day investment horizon FirstService Corp is expected to under-perform the Redfin Corp. But the stock apears to be less risky and, when comparing its historical volatility, FirstService Corp is 7.09 times less risky than Redfin Corp. The stock trades about -0.1 of its potential returns per unit of risk. The Redfin Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  794.00  in Redfin Corp on December 30, 2024 and sell it today you would earn a total of  227.00  from holding Redfin Corp or generate 28.59% return on investment over 90 days.

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

FirstService Corp  vs.  Redfin Corp

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.

Redfin Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Redfin Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Redfin Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstService Corp and Redfin Corp

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

The idea behind FirstService Corp and Redfin 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.