Correlation Between First Industrial and National Storage
Can any of the company-specific risk be diversified away by investing in both First Industrial and National Storage 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 National Storage 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 National Storage Affiliates, you can compare the effects of market volatilities on First Industrial and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and National Storage.
Diversification Opportunities for First Industrial and National Storage
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and National is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of First Industrial i.e., First Industrial and National Storage go up and down completely randomly.
Pair Corralation between First Industrial and National Storage
Allowing for the 90-day total investment horizon First Industrial is expected to generate 5.2 times less return on investment than National Storage. But when comparing it to its historical volatility, First Industrial Realty is 1.39 times less risky than National Storage. It trades about 0.04 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,302 in National Storage Affiliates on August 29, 2024 and sell it today you would earn a total of 236.00 from holding National Storage Affiliates or generate 5.49% 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. National Storage Affiliates
Performance |
| Timeline |
| First Industrial Realty |
| National Storage Aff |
First Industrial and National Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and National Storage
The main advantage of trading using opposite First Industrial and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage'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 |
| National Storage vs. Extra Space Storage | National Storage vs. Americold Realty Trust | National Storage vs. Public Storage | National Storage vs. Terreno Realty |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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