Correlation Between Retail Opportunity and Firm Capital

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

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

Diversification Opportunities for Retail Opportunity and Firm Capital

0.76

Correlation Coefficient

Retail Opportunity  Firm Capital

Poor diversification

The 3 months correlation between Retail and Firm is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Retail Opportunity Investments 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 Retail Opportunity 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 Retail Opportunity Investments 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 Retail Opportunity i.e., Retail Opportunity and Firm Capital go up and down completely randomly.

Pair Corralation between Retail Opportunity and Firm Capital

Given the investment horizon of 90 days Retail Opportunity is expected to generate 5.65 times less return on investment than Firm Capital. But when comparing it to its historical volatility, Retail Opportunity Investments is 15.23 times less risky than Firm Capital. It trades about 0.19 of its potential returns per unit of risk. Firm Capital Property is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  381.00  in Firm Capital Property on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Firm Capital Property or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	51.61%
Values	Daily Returns

Retail Opportunity Investments  vs.  Firm Capital Property

Retail Opportunity

Risk-Adjusted Performance

Good

Over the last 90 days Retail Opportunity Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Retail Opportunity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Firm Capital Property

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 5 (%) 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 April 2025.

Pair Trading with Retail Opportunity and Firm Capital

The main advantage of trading using opposite Retail Opportunity and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Opportunity 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 Retail Opportunity Investments 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.