Correlation Between Timbercreek Financial and Firm Capital

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

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

Diversification Opportunities for Timbercreek Financial and Firm Capital

0.07

Correlation Coefficient

Timbercreek Financial  Firm Capital

Significant diversification

The 3 months correlation between Timbercreek and Firm is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and Firm Capital Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Mortgage and Timbercreek Financial 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 Timbercreek Financial Corp 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 Mortgage has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and Firm Capital go up and down completely randomly.

Pair Corralation between Timbercreek Financial and Firm Capital

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the Firm Capital. In addition to that, Timbercreek Financial is 1.66 times more volatile than Firm Capital Mortgage. It trades about -0.02 of its total potential returns per unit of risk. Firm Capital Mortgage is currently generating about 0.13 per unit of volatility. If you would invest  1,109  in Firm Capital Mortgage on September 4, 2024 and sell it today you would earn a total of  72.00  from holding Firm Capital Mortgage or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Timbercreek Financial Corp  vs.  Firm Capital Mortgage

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Timbercreek Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Firm Capital Mortgage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Firm Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Timbercreek Financial and Firm Capital

The main advantage of trading using opposite Timbercreek Financial and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timbercreek Financial 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 Timbercreek Financial Corp and Firm Capital Mortgage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.