Correlation Between First Industrial and Paramount
Can any of the company-specific risk be diversified away by investing in both First Industrial and Paramount 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 Paramount 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 Paramount Group, you can compare the effects of market volatilities on First Industrial and Paramount 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 Paramount. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Paramount.
Diversification Opportunities for First Industrial and Paramount
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Paramount is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Paramount Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Group 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 Paramount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Group has no effect on the direction of First Industrial i.e., First Industrial and Paramount go up and down completely randomly.
Pair Corralation between First Industrial and Paramount
Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.64 times more return on investment than Paramount. However, First Industrial Realty is 1.56 times less risky than Paramount. It trades about 0.04 of its potential returns per unit of risk. Paramount Group is currently generating about -0.14 per unit of risk. If you would invest 5,036 in First Industrial Realty on October 21, 2024 and sell it today you would earn a total of 42.00 from holding First Industrial Realty or generate 0.83% 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. Paramount Group
Performance |
| Timeline |
| First Industrial Realty |
| Paramount Group |
First Industrial and Paramount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Paramount
The main advantage of trading using opposite First Industrial and Paramount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Paramount 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 Paramount will offset losses from the drop in Paramount'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 |
| Paramount vs. Highwoods Properties | Paramount vs. Piedmont Office Realty | Paramount vs. Douglas Emmett | Paramount vs. Kilroy Realty Corp |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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