Correlation Between Redfin Corp and FirstService Corp

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

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

Diversification Opportunities for Redfin Corp and FirstService Corp

-0.53

Correlation Coefficient

Redfin Corp  FirstService Corp

Excellent diversification

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

Pair Corralation between Redfin Corp and FirstService Corp

Given the investment horizon of 90 days Redfin Corp is expected to generate 7.09 times more return on investment than FirstService Corp. However, Redfin Corp is 7.09 times more volatile than FirstService Corp. It trades about 0.08 of its potential returns per unit of risk. FirstService Corp is currently generating about -0.1 per unit of risk. 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

Redfin Corp  vs.  FirstService Corp

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.

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.

Pair Trading with Redfin Corp and FirstService Corp

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

The idea behind Redfin Corp and FirstService 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.