Correlation Between Frontdoor and FirstService Corp

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

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

Diversification Opportunities for Frontdoor and FirstService Corp

0.37

Correlation Coefficient

Frontdoor  FirstService Corp

Weak diversification

The 3 months correlation between Frontdoor and FirstService is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and FirstService Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstService Corp and Frontdoor 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 Frontdoor 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 Frontdoor i.e., Frontdoor and FirstService Corp go up and down completely randomly.

Pair Corralation between Frontdoor and FirstService Corp

Given the investment horizon of 90 days Frontdoor is expected to generate 1.14 times less return on investment than FirstService Corp. But when comparing it to its historical volatility, Frontdoor is 1.13 times less risky than FirstService Corp. It trades about 0.14 of its potential returns per unit of risk. FirstService Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  17,373  in FirstService Corp on May 3, 2025 and sell it today you would earn a total of  2,349  from holding FirstService Corp or generate 13.52% return on investment over 90 days.

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

Frontdoor  vs.  FirstService Corp

Frontdoor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Frontdoor may actually be approaching a critical reversion point that can send shares even higher in September 2025.

FirstService Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, FirstService Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontdoor and FirstService Corp

The main advantage of trading using opposite Frontdoor and FirstService Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontdoor 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 Frontdoor 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.