Correlation Between First Industrial and Saul Centers

Can any of the company-specific risk be diversified away by investing in both First Industrial and Saul Centers 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 Saul Centers 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 Saul Centers, you can compare the effects of market volatilities on First Industrial and Saul Centers 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 Saul Centers. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Saul Centers.

Diversification Opportunities for First Industrial and Saul Centers

0.45

Correlation Coefficient

First Industrial  Saul Centers

Very weak diversification

The 3 months correlation between First and Saul is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Saul Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saul Centers 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 Saul Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saul Centers has no effect on the direction of First Industrial i.e., First Industrial and Saul Centers go up and down completely randomly.

Pair Corralation between First Industrial and Saul Centers

Allowing for the 90-day total investment horizon First Industrial is expected to generate 1.18 times less return on investment than Saul Centers. But when comparing it to its historical volatility, First Industrial Realty is 1.01 times less risky than Saul Centers. It trades about 0.05 of its potential returns per unit of risk. Saul Centers is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,559  in Saul Centers on September 22, 2024 and sell it today you would earn a total of  307.00  from holding Saul Centers or generate 8.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

First Industrial Realty  vs.  Saul Centers

First Industrial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Industrial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Saul Centers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saul Centers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Saul Centers is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Industrial and Saul Centers

The main advantage of trading using opposite First Industrial and Saul Centers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Saul Centers 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 Saul Centers will offset losses from the drop in Saul Centers' long position.

The idea behind First Industrial Realty and Saul Centers pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.