Correlation Between Firm Capital and Smart REIT
Can any of the company-specific risk be diversified away by investing in both Firm Capital and Smart REIT 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 Smart REIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firm Capital Property and Smart REIT, you can compare the effects of market volatilities on Firm Capital and Smart REIT 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 Smart REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and Smart REIT.
Diversification Opportunities for Firm Capital and Smart REIT
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Firm and Smart is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Property and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart 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 Property are associated (or correlated) with Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Firm Capital i.e., Firm Capital and Smart REIT go up and down completely randomly.
Pair Corralation between Firm Capital and Smart REIT
Assuming the 90 days horizon Firm Capital Property is expected to generate 1.75 times more return on investment than Smart REIT. However, Firm Capital is 1.75 times more volatile than Smart REIT. It trades about -0.02 of its potential returns per unit of risk. Smart REIT is currently generating about -0.05 per unit of risk. If you would invest 389.00 in Firm Capital Property on October 20, 2024 and sell it today you would lose (4.00) from holding Firm Capital Property or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Firm Capital Property vs. Smart REIT
Performance |
| Timeline |
| Firm Capital Property |
| Smart REIT |
Firm Capital and Smart REIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firm Capital and Smart REIT
The main advantage of trading using opposite Firm Capital and Smart REIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firm Capital position performs unexpectedly, Smart REIT 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 Smart REIT will offset losses from the drop in Smart REIT's long position.| Firm Capital vs. VICI Properties | Firm Capital vs. Goodman Group | Firm Capital vs. W P Carey | Firm Capital vs. Stockland |
| Smart REIT vs. Firm Capital Property | Smart REIT vs. Slate Grocery REIT | Smart REIT vs. Phillips Edison Co | Smart REIT vs. Choice Properties Real |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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