Correlation Between First Industrial and Invitation Homes
Can any of the company-specific risk be diversified away by investing in both First Industrial and Invitation Homes 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 Invitation Homes 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 Invitation Homes, you can compare the effects of market volatilities on First Industrial and Invitation Homes 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 Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Invitation Homes.
Diversification Opportunities for First Industrial and Invitation Homes
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Invitation is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of First Industrial i.e., First Industrial and Invitation Homes go up and down completely randomly.
Pair Corralation between First Industrial and Invitation Homes
Allowing for the 90-day total investment horizon First Industrial is expected to generate 1.13 times less return on investment than Invitation Homes. But when comparing it to its historical volatility, First Industrial Realty is 1.02 times less risky than Invitation Homes. It trades about 0.02 of its potential returns per unit of risk. Invitation Homes is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,037 in Invitation Homes on August 23, 2024 and sell it today you would earn a total of 345.00 from holding Invitation Homes or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. Invitation Homes
Performance |
| Timeline |
| First Industrial Realty |
| Invitation Homes |
First Industrial and Invitation Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Invitation Homes
The main advantage of trading using opposite First Industrial and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Invitation Homes 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 Invitation Homes will offset losses from the drop in Invitation Homes' 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 |
| Invitation Homes vs. American Homes 4 | Invitation Homes vs. Mid America Apartment Communities | Invitation Homes vs. Camden Property Trust | Invitation Homes vs. Sun Communities |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |