Correlation Between First Industrial and Real Estate
Can any of the company-specific risk be diversified away by investing in both First Industrial and Real Estate 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 Real Estate 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 Real Estate Securities, you can compare the effects of market volatilities on First Industrial and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Real Estate.
Diversification Opportunities for First Industrial and Real Estate
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Real is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of First Industrial i.e., First Industrial and Real Estate go up and down completely randomly.
Pair Corralation between First Industrial and Real Estate
Allowing for the 90-day total investment horizon First Industrial is expected to generate 2.65 times less return on investment than Real Estate. In addition to that, First Industrial is 1.29 times more volatile than Real Estate Securities. It trades about 0.02 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.06 per unit of volatility. If you would invest 2,513 in Real Estate Securities on August 31, 2024 and sell it today you would earn a total of 594.00 from holding Real Estate Securities or generate 23.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
First Industrial Realty vs. Real Estate Securities
Performance |
| Timeline |
| First Industrial Realty |
| Real Estate Securities |
First Industrial and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Real Estate
The main advantage of trading using opposite First Industrial and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate'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 |
| Real Estate vs. Franklin Natural Resources | Real Estate vs. Templeton Developing Markets | Real Estate vs. Franklin Utilities Fund | Real Estate vs. Aquagold International |
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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