Correlation Between Barratt Developments and FIRST SHIP

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

By analyzing existing cross correlation between Barratt Developments plc and FIRST SHIP LEASE, you can compare the effects of market volatilities on Barratt Developments and FIRST SHIP 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 Barratt Developments with a short position of FIRST SHIP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barratt Developments and FIRST SHIP.

Diversification Opportunities for Barratt Developments and FIRST SHIP

0.22

Correlation Coefficient

Barratt Developments  FIRST SHIP

Modest diversification

The 3 months correlation between Barratt and FIRST is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments plc and FIRST SHIP LEASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SHIP LEASE and Barratt Developments 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 Barratt Developments plc are associated (or correlated) with FIRST SHIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SHIP LEASE has no effect on the direction of Barratt Developments i.e., Barratt Developments and FIRST SHIP go up and down completely randomly.

Pair Corralation between Barratt Developments and FIRST SHIP

Assuming the 90 days horizon Barratt Developments plc is expected to under-perform the FIRST SHIP. But the stock apears to be less risky and, when comparing its historical volatility, Barratt Developments plc is 1.2 times less risky than FIRST SHIP. The stock trades about -0.09 of its potential returns per unit of risk. The FIRST SHIP LEASE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.60  in FIRST SHIP LEASE on April 22, 2025 and sell it today you would earn a total of  0.08  from holding FIRST SHIP LEASE or generate 5.0% return on investment over 90 days.

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

Barratt Developments plc  vs.  FIRST SHIP LEASE

Barratt Developments plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barratt Developments plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FIRST SHIP LEASE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SHIP LEASE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIRST SHIP may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Barratt Developments and FIRST SHIP

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

The idea behind Barratt Developments plc and FIRST SHIP LEASE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.