Correlation Between First Industrial and Realty Income

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

Diversification Opportunities for First Industrial and Realty Income

0.95

Correlation Coefficient

First Industrial  Realty Income

Almost no diversification

The 3 months correlation between First and Realty is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of First Industrial i.e., First Industrial and Realty Income go up and down completely randomly.

Pair Corralation between First Industrial and Realty Income

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.22 times more return on investment than Realty Income. However, First Industrial is 1.22 times more volatile than Realty Income. It trades about 0.19 of its potential returns per unit of risk. Realty Income is currently generating about 0.19 per unit of risk. If you would invest  4,705  in First Industrial Realty on June 12, 2024 and sell it today you would earn a total of  939.00  from holding First Industrial Realty or generate 19.96% return on investment over 90 days.

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

First Industrial Realty  vs.  Realty Income

First Industrial Realty

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Industrial Realty are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Realty Income

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Realty Income displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Industrial and Realty Income

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

The idea behind First Industrial Realty and Realty Income 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.