Correlation Between Highlands REIT and Firm Capital
Can any of the company-specific risk be diversified away by investing in both Highlands REIT and Firm Capital 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 Highlands REIT and Firm Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlands REIT and Firm Capital Property, you can compare the effects of market volatilities on Highlands REIT and Firm Capital 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 Highlands REIT with a short position of Firm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlands REIT and Firm Capital.
Diversification Opportunities for Highlands REIT and Firm Capital
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Highlands and Firm is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Highlands REIT and Firm Capital Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Property and Highlands REIT 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 Highlands REIT are associated (or correlated) with Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Property has no effect on the direction of Highlands REIT i.e., Highlands REIT and Firm Capital go up and down completely randomly.
Pair Corralation between Highlands REIT and Firm Capital
Given the investment horizon of 90 days Highlands REIT is expected to generate 2.83 times more return on investment than Firm Capital. However, Highlands REIT is 2.83 times more volatile than Firm Capital Property. It trades about 0.2 of its potential returns per unit of risk. Firm Capital Property is currently generating about 0.05 per unit of risk. If you would invest 17.00 in Highlands REIT on September 6, 2024 and sell it today you would lose (13.00) from holding Highlands REIT or give up 76.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Highlands REIT vs. Firm Capital Property
Performance |
Timeline |
Highlands REIT |
Firm Capital Property |
Highlands REIT and Firm Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Highlands REIT and Firm Capital
The main advantage of trading using opposite Highlands REIT and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlands REIT position performs unexpectedly, Firm Capital 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 Firm Capital will offset losses from the drop in Firm Capital's long position.Highlands REIT vs. Ashford Hospitality Trust | Highlands REIT vs. Ashford Hospitality Trust | Highlands REIT vs. Ashford Hospitality Trust | Highlands REIT vs. Ashford Hospitality Trust |
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Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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