Correlation Between First Capital and Plaza Retail

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

Diversification Opportunities for First Capital and Plaza Retail

0.92

Correlation Coefficient

First Capital  Plaza Retail

Almost no diversification

The 3 months correlation between First and Plaza is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Capital Real 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 First 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 First Capital Real 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 First Capital i.e., First Capital and Plaza Retail go up and down completely randomly.

Pair Corralation between First Capital and Plaza Retail

Assuming the 90 days trading horizon First Capital Real is expected to generate 1.62 times more return on investment than Plaza Retail. However, First Capital is 1.62 times more volatile than Plaza Retail REIT. It trades about 0.25 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about 0.19 per unit of risk. If you would invest  1,622  in First Capital Real on April 22, 2025 and sell it today you would earn a total of  266.00  from holding First Capital Real or generate 16.4% return on investment over 90 days.

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

First Capital Real  vs.  Plaza Retail REIT

First Capital Real

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital Real are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Plaza Retail REIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza Retail REIT are ranked lower than 15 (%) 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 First Capital and Plaza Retail

The main advantage of trading using opposite First Capital and Plaza Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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 First Capital Real 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.