Correlation Between First Industrial and Extra Space
Can any of the company-specific risk be diversified away by investing in both First Industrial and Extra Space 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 Industrial and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Industrial Realty and Extra Space Storage, you can compare the effects of market volatilities on First Industrial and Extra Space 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 Industrial with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Extra Space.
Diversification Opportunities for First Industrial and Extra Space
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Extra is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and First Industrial 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 Industrial Realty are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of First Industrial i.e., First Industrial and Extra Space go up and down completely randomly.
Pair Corralation between First Industrial and Extra Space
Assuming the 90 days horizon First Industrial is expected to generate 1.65 times less return on investment than Extra Space. But when comparing it to its historical volatility, First Industrial Realty is 1.11 times less risky than Extra Space. It trades about 0.03 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13,505 in Extra Space Storage on September 14, 2024 and sell it today you would earn a total of 1,635 from holding Extra Space Storage or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
First Industrial Realty vs. Extra Space Storage
Performance |
| Timeline |
| First Industrial Realty |
| Extra Space Storage |
First Industrial and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Extra Space
The main advantage of trading using opposite First Industrial and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.| First Industrial vs. Extra Space Storage | First Industrial vs. REXFORD INDREALTY DL 01 | First Industrial vs. CubeSmart | First Industrial vs. Warehouses De Pauw |
| Extra Space vs. REXFORD INDREALTY DL 01 | Extra Space vs. CubeSmart | Extra Space vs. First Industrial Realty | Extra Space vs. Warehouses De Pauw |
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 Directory module to find actively traded commodities issued by global exchanges.
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