Correlation Between Firm Capital and K Bro

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

Diversification Opportunities for Firm Capital and K Bro

0.49

Correlation Coefficient

Firm Capital  K Bro

Very weak diversification

The 3 months correlation between Firm and KBRLF is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and K Bro Linen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Bro Linen 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 K Bro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Bro Linen has no effect on the direction of Firm Capital i.e., Firm Capital and K Bro go up and down completely randomly.

Pair Corralation between Firm Capital and K Bro

Assuming the 90 days horizon Firm Capital Mortgage is expected to generate 0.64 times more return on investment than K Bro. However, Firm Capital Mortgage is 1.56 times less risky than K Bro. It trades about -0.07 of its potential returns per unit of risk. K Bro Linen is currently generating about -0.24 per unit of risk. If you would invest  901.00  in Firm Capital Mortgage on May 17, 2025 and sell it today you would lose (11.00) from holding Firm Capital Mortgage or give up 1.22% of portfolio value over 90 days.

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

Firm Capital Mortgage  vs.  K Bro Linen

Firm Capital Mortgage

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Firm Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

K Bro Linen

Risk-Adjusted Performance

Weakest

Over the last 90 days K Bro Linen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, K Bro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Firm Capital and K Bro

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

The idea behind Firm Capital Mortgage and K Bro Linen 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.