Correlation Between Firm Capital and Choice Properties

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

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

Diversification Opportunities for Firm Capital and Choice Properties

0.53

Correlation Coefficient

Firm Capital  Choice Properties

Very weak diversification

The 3 months correlation between Firm and Choice is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and Choice Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Properties Real and Firm Capital 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 Firm Capital Mortgage are associated (or correlated) with Choice Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Properties Real has no effect on the direction of Firm Capital i.e., Firm Capital and Choice Properties go up and down completely randomly.

Pair Corralation between Firm Capital and Choice Properties

Assuming the 90 days horizon Firm Capital Mortgage is expected to generate 0.52 times more return on investment than Choice Properties. However, Firm Capital Mortgage is 1.92 times less risky than Choice Properties. It trades about 0.2 of its potential returns per unit of risk. Choice Properties Real is currently generating about 0.05 per unit of risk. If you would invest  1,164  in Firm Capital Mortgage on April 23, 2025 and sell it today you would earn a total of  69.00  from holding Firm Capital Mortgage or generate 5.93% return on investment over 90 days.

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

Firm Capital Mortgage  vs.  Choice Properties Real

Firm Capital Mortgage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Firm Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Choice Properties Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Properties Real are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Choice Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Firm Capital and Choice Properties

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

The idea behind Firm Capital Mortgage and Choice Properties 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.