Correlation Between First Industrial and Elme Communities
Can any of the company-specific risk be diversified away by investing in both First Industrial and Elme Communities 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 Elme Communities 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 Elme Communities, you can compare the effects of market volatilities on First Industrial and Elme Communities 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 Elme Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Elme Communities.
Diversification Opportunities for First Industrial and Elme Communities
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Elme is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities 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 Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of First Industrial i.e., First Industrial and Elme Communities go up and down completely randomly.
Pair Corralation between First Industrial and Elme Communities
Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.99 times more return on investment than Elme Communities. However, First Industrial Realty is 1.01 times less risky than Elme Communities. It trades about 0.11 of its potential returns per unit of risk. Elme Communities is currently generating about 0.08 per unit of risk. If you would invest 4,602 in First Industrial Realty on August 31, 2024 and sell it today you would earn a total of 743.00 from holding First Industrial Realty or generate 16.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. Elme Communities
Performance |
| Timeline |
| First Industrial Realty |
| Elme Communities |
First Industrial and Elme Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Elme Communities
The main advantage of trading using opposite First Industrial and Elme Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Elme Communities 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 Elme Communities will offset losses from the drop in Elme Communities' 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 |
| Elme Communities vs. BRT Realty Trust | Elme Communities vs. Nexpoint Residential Trust | Elme Communities vs. Centerspace | Elme Communities vs. Veris Residential |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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