Correlation Between Modiv and Firm Capital

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

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

Diversification Opportunities for Modiv and Firm Capital

-0.64

Correlation Coefficient

Modiv  Firm Capital

Excellent diversification

The 3 months correlation between Modiv and Firm is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc 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 Modiv 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 Modiv Inc 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 Modiv i.e., Modiv and Firm Capital go up and down completely randomly.

Pair Corralation between Modiv and Firm Capital

Assuming the 90 days trading horizon Modiv is expected to generate 6.53 times less return on investment than Firm Capital. But when comparing it to its historical volatility, Modiv Inc is 3.07 times less risky than Firm Capital. It trades about 0.02 of its potential returns per unit of risk. Firm Capital Property is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Firm Capital Property on December 19, 2024 and sell it today you would earn a total of  14.00  from holding Firm Capital Property or generate 3.64% return on investment over 90 days.

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

Modiv Inc  vs.  Firm Capital Property

Modiv Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Modiv is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Firm Capital Property

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Firm Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Modiv and Firm Capital

The main advantage of trading using opposite Modiv and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modiv 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 Modiv Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.