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

0.05

Correlation Coefficient

Highlands REIT  Firm Capital

Significant diversification

The 3 months correlation between Highlands and Firm is 0.05. 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 79.67 times more return on investment than Firm Capital. However, Highlands REIT is 79.67 times more volatile than Firm Capital Property. It trades about 0.27 of its potential returns per unit of risk. Firm Capital Property is currently generating about -0.25 per unit of risk. If you would invest  2.16  in Highlands REIT on September 10, 2024 and sell it today you would earn a total of  0.74  from holding Highlands REIT or generate 34.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Highlands REIT  vs.  Firm Capital Property

Highlands REIT

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Highlands REIT are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Highlands REIT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Firm Capital Property

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Firm Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

The idea behind Highlands REIT and Firm Capital Property 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.