Correlation Between First Capital and European Residential
Can any of the company-specific risk be diversified away by investing in both First Capital and European Residential 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 European Residential 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 European Residential Real, you can compare the effects of market volatilities on First Capital and European Residential 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 European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and European Residential.
Diversification Opportunities for First Capital and European Residential
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and European is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding First Capital Real and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of First Capital i.e., First Capital and European Residential go up and down completely randomly.
Pair Corralation between First Capital and European Residential
Assuming the 90 days trading horizon First Capital Real is expected to under-perform the European Residential. But the stock apears to be less risky and, when comparing its historical volatility, First Capital Real is 4.04 times less risky than European Residential. The stock trades about -0.12 of its potential returns per unit of risk. The European Residential Real is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 305.00 in European Residential Real on August 29, 2024 and sell it today you would earn a total of 58.00 from holding European Residential Real or generate 19.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital Real vs. European Residential Real
Performance |
| Timeline |
| First Capital Real |
| European Residential Real |
First Capital and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and European Residential
The main advantage of trading using opposite First Capital and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.| First Capital vs. Killam Apartment Real | First Capital vs. InterRent Real Estate | First Capital vs. Crombie Real Estate | First Capital vs. Allied Properties Real |
| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard North American |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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