Correlation Between Mainstreet Equity and FirstService Corp

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

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

Diversification Opportunities for Mainstreet Equity and FirstService Corp

0.18

Correlation Coefficient

Mainstreet Equity  FirstService Corp

Average diversification

The 3 months correlation between Mainstreet and FirstService is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mainstreet Equity Corp and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp and Mainstreet Equity 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 Mainstreet Equity Corp 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 Mainstreet Equity i.e., Mainstreet Equity and FirstService Corp go up and down completely randomly.

Pair Corralation between Mainstreet Equity and FirstService Corp

Assuming the 90 days trading horizon Mainstreet Equity Corp is expected to under-perform the FirstService Corp. But the stock apears to be less risky and, when comparing its historical volatility, Mainstreet Equity Corp is 1.17 times less risky than FirstService Corp. The stock trades about -0.01 of its potential returns per unit of risk. The FirstService Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23,780  in FirstService Corp on April 24, 2025 and sell it today you would earn a total of  675.00  from holding FirstService Corp or generate 2.84% return on investment over 90 days.

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

Mainstreet Equity Corp  vs.  FirstService Corp

Mainstreet Equity Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mainstreet Equity Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mainstreet Equity is not utilizing all of its potentials. The recent stock price disarray, 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 3 (%) 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 Mainstreet Equity and FirstService Corp

The main advantage of trading using opposite Mainstreet Equity and FirstService Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstreet Equity 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 Mainstreet Equity Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.