Correlation Between Firm Capital and Plaza Retail

Can any of the company-specific risk be diversified away by investing in both Firm Capital and Plaza Retail 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 Plaza Retail 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 Plaza Retail REIT, you can compare the effects of market volatilities on Firm Capital and Plaza Retail 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 Plaza Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and Plaza Retail.

Diversification Opportunities for Firm Capital and Plaza Retail

0.93

Correlation Coefficient

Firm Capital  Plaza Retail

Almost no diversification

The 3 months correlation between Firm and Plaza is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Firm Capital i.e., Firm Capital and Plaza Retail go up and down completely randomly.

Pair Corralation between Firm Capital and Plaza Retail

Assuming the 90 days horizon Firm Capital is expected to generate 1.76 times less return on investment than Plaza Retail. But when comparing it to its historical volatility, Firm Capital Mortgage is 1.25 times less risky than Plaza Retail. It trades about 0.18 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  366.00  in Plaza Retail REIT on April 24, 2025 and sell it today you would earn a total of  35.00  from holding Plaza Retail REIT or generate 9.56% return on investment over 90 days.

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

Firm Capital Mortgage  vs.  Plaza Retail REIT

Firm Capital Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 13 (%) 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.

Plaza Retail REIT

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Plaza Retail may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Firm Capital and Plaza Retail

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

The idea behind Firm Capital Mortgage and Plaza Retail REIT 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.