Correlation Between Urban Edge and Firm Capital

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

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

Diversification Opportunities for Urban Edge and Firm Capital

0.27

Correlation Coefficient

Urban Edge  Firm Capital

Modest diversification

The 3 months correlation between Urban and Firm is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties 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 Urban Edge 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 Urban Edge Properties 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 Urban Edge i.e., Urban Edge and Firm Capital go up and down completely randomly.

Pair Corralation between Urban Edge and Firm Capital

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to generate 0.9 times more return on investment than Firm Capital. However, Urban Edge Properties is 1.11 times less risky than Firm Capital. It trades about -0.2 of its potential returns per unit of risk. Firm Capital Property is currently generating about -0.35 per unit of risk. If you would invest  2,332  in Urban Edge Properties on September 13, 2024 and sell it today you would lose (86.00) from holding Urban Edge Properties or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Urban Edge Properties  vs.  Firm Capital Property

Urban Edge Properties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Urban Edge Properties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Urban Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Firm Capital Property

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Firm Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Urban Edge and Firm Capital

The main advantage of trading using opposite Urban Edge and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Edge 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 Urban Edge Properties 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.