Correlation Between First Industrial and Mid America
Can any of the company-specific risk be diversified away by investing in both First Industrial and Mid America 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 Mid America 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 Mid America Apartment Communities, you can compare the effects of market volatilities on First Industrial and Mid America 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 Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Mid America.
Diversification Opportunities for First Industrial and Mid America
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Mid is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of First Industrial i.e., First Industrial and Mid America go up and down completely randomly.
Pair Corralation between First Industrial and Mid America
Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Mid America. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.11 times less risky than Mid America. The stock trades about -0.07 of its potential returns per unit of risk. The Mid America Apartment Communities is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,452 in Mid America Apartment Communities on August 31, 2024 and sell it today you would earn a total of 398.00 from holding Mid America Apartment Communities or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. Mid America Apartment Communit
Performance |
| Timeline |
| First Industrial Realty |
| Mid America Apartment |
First Industrial and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Mid America
The main advantage of trading using opposite First Industrial and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America'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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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