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
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Extra is 0.83. 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
Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Extra Space. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.56 times less risky than Extra Space. The stock trades about -0.2 of its potential returns per unit of risk. The Extra Space Storage is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 16,906 in Extra Space Storage on August 24, 2024 and sell it today you would lose (218.00) from holding Extra Space Storage or give up 1.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| 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. LXP Industrial Trust | First Industrial vs. Plymouth Industrial REIT | First Industrial vs. Global Self Storage | First Industrial vs. Terreno Realty |
| Extra Space vs. CubeSmart | Extra Space vs. National Storage Affiliates | Extra Space vs. Public Storage | Extra Space vs. EastGroup Properties |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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