Correlation Between European Residential and FirstService Corp

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

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

Diversification Opportunities for European Residential and FirstService Corp

0.26

Correlation Coefficient

European Residential  FirstService Corp

Modest diversification

The 3 months correlation between European and FirstService is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp and European Residential 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 European Residential Real are associated (or correlated) with FirstService Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstService Corp has no effect on the direction of European Residential i.e., European Residential and FirstService Corp go up and down completely randomly.

Pair Corralation between European Residential and FirstService Corp

Assuming the 90 days trading horizon European Residential Real is expected to generate 0.97 times more return on investment than FirstService Corp. However, European Residential Real is 1.03 times less risky than FirstService Corp. It trades about 0.07 of its potential returns per unit of risk. FirstService Corp is currently generating about 0.06 per unit of risk. If you would invest  246.00  in European Residential Real on April 21, 2025 and sell it today you would earn a total of  11.00  from holding European Residential Real or generate 4.47% return on investment over 90 days.

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

European Residential Real  vs.  FirstService Corp

European Residential Real

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, European Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FirstService Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FirstService Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with European Residential and FirstService Corp

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

The idea behind European Residential Real and FirstService Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.