Correlation Between Slate Office and First Capital

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

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

Diversification Opportunities for Slate Office and First Capital

0.22

Correlation Coefficient

Slate Office  First Capital

Modest diversification

The 3 months correlation between Slate and First is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Slate Office REIT 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 Slate Office 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 Slate Office REIT 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 Slate Office i.e., Slate Office and First Capital go up and down completely randomly.

Pair Corralation between Slate Office and First Capital

Assuming the 90 days trading horizon Slate Office REIT is expected to generate 12.35 times more return on investment than First Capital. However, Slate Office is 12.35 times more volatile than First Capital Real. It trades about 0.25 of its potential returns per unit of risk. First Capital Real is currently generating about -0.15 per unit of risk. If you would invest  40.00  in Slate Office REIT on October 13, 2024 and sell it today you would earn a total of  26.00  from holding Slate Office REIT or generate 65.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Slate Office REIT  vs.  First Capital Real

Slate Office REIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Slate Office REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Slate Office sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Slate Office and First Capital

The main advantage of trading using opposite Slate Office and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Slate Office 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 Slate Office REIT 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.