Correlation Between First Industrial and Centerspace

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

Diversification Opportunities for First Industrial and Centerspace

0.86

Correlation Coefficient

First Industrial  Centerspace

Very poor diversification

The 3 months correlation between First and Centerspace is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Centerspace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerspace 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 Centerspace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerspace has no effect on the direction of First Industrial i.e., First Industrial and Centerspace go up and down completely randomly.

Pair Corralation between First Industrial and Centerspace

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Centerspace. In addition to that, First Industrial is 1.42 times more volatile than Centerspace. It trades about -0.07 of its total potential returns per unit of risk. Centerspace is currently generating about -0.01 per unit of volatility. If you would invest  6,026  in Centerspace on January 30, 2025 and sell it today you would lose (109.00) from holding Centerspace or give up 1.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

First Industrial Realty  vs.  Centerspace

First Industrial Realty

Risk-Adjusted Performance

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.

Centerspace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centerspace has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Centerspace is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Industrial and Centerspace

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

The idea behind First Industrial Realty and Centerspace 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.