Correlation Between Safehold and Brightspire Capital

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

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

Diversification Opportunities for Safehold and Brightspire Capital

-0.68

Correlation Coefficient

Safehold  Brightspire Capital

Excellent diversification

The 3 months correlation between Safehold and Brightspire is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Safehold and Brightspire Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightspire Capital and Safehold 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 Safehold are associated (or correlated) with Brightspire Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightspire Capital has no effect on the direction of Safehold i.e., Safehold and Brightspire Capital go up and down completely randomly.

Pair Corralation between Safehold and Brightspire Capital

Given the investment horizon of 90 days Safehold is expected to under-perform the Brightspire Capital. In addition to that, Safehold is 1.02 times more volatile than Brightspire Capital. It trades about -0.01 of its total potential returns per unit of risk. Brightspire Capital is currently generating about -0.01 per unit of volatility. If you would invest  653.00  in Brightspire Capital on October 7, 2024 and sell it today you would lose (70.00) from holding Brightspire Capital or give up 10.72% of portfolio value over 90 days.

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

Safehold  vs.  Brightspire Capital

Safehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safehold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Brightspire Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brightspire Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Brightspire Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Safehold and Brightspire Capital

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

The idea behind Safehold and Brightspire Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.