Correlation Between InterRent Real and First Capital

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

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

Diversification Opportunities for InterRent Real and First Capital

0.79

Correlation Coefficient

InterRent Real  First Capital

Poor diversification

The 3 months correlation between InterRent and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding InterRent Real Estate and First Capital Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Real and InterRent Real 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 InterRent Real Estate are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Real has no effect on the direction of InterRent Real i.e., InterRent Real and First Capital go up and down completely randomly.

Pair Corralation between InterRent Real and First Capital

Assuming the 90 days trading horizon InterRent Real Estate is expected to under-perform the First Capital. In addition to that, InterRent Real is 1.43 times more volatile than First Capital Real. It trades about -0.27 of its total potential returns per unit of risk. First Capital Real is currently generating about -0.06 per unit of volatility. If you would invest  1,807  in First Capital Real on September 12, 2024 and sell it today you would lose (61.00) from holding First Capital Real or give up 3.38% of portfolio value over 90 days.

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

InterRent Real Estate  vs.  First Capital Real

InterRent Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InterRent Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

First Capital Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with InterRent Real and First Capital

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

The idea behind InterRent Real Estate and First Capital Real 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.