Correlation Between First Industrial and Armada Hflr
Can any of the company-specific risk be diversified away by investing in both First Industrial and Armada Hflr 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 Armada Hflr 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 Armada Hflr Pr, you can compare the effects of market volatilities on First Industrial and Armada Hflr 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 Armada Hflr. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Armada Hflr.
Diversification Opportunities for First Industrial and Armada Hflr
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Armada is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Armada Hflr Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Hflr Pr 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 Armada Hflr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Hflr Pr has no effect on the direction of First Industrial i.e., First Industrial and Armada Hflr go up and down completely randomly.
Pair Corralation between First Industrial and Armada Hflr
Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.06 times more return on investment than Armada Hflr. However, First Industrial is 1.06 times more volatile than Armada Hflr Pr. It trades about 0.1 of its potential returns per unit of risk. Armada Hflr Pr is currently generating about 0.07 per unit of risk. If you would invest 5,284 in First Industrial Realty on August 30, 2024 and sell it today you would earn a total of 124.00 from holding First Industrial Realty or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Industrial Realty vs. Armada Hflr Pr
Performance |
| Timeline |
| First Industrial Realty |
| Armada Hflr Pr |
First Industrial and Armada Hflr Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Armada Hflr
The main advantage of trading using opposite First Industrial and Armada Hflr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Armada Hflr 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 Armada Hflr will offset losses from the drop in Armada Hflr's long position.| First Industrial vs. LXP Industrial Trust | First Industrial vs. Plymouth Industrial REIT | First Industrial vs. Global Self Storage | First Industrial vs. Terreno Realty |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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