Correlation Between First Industrial and Apartment Investment

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

Diversification Opportunities for First Industrial and Apartment Investment

-0.43

Correlation Coefficient

First Industrial  Apartment Investment

Very good diversification

The 3 months correlation between First and Apartment is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and 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 Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of First Industrial i.e., First Industrial and Apartment Investment go up and down completely randomly.

Pair Corralation between First Industrial and Apartment Investment

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Apartment Investment. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.16 times less risky than Apartment Investment. The stock trades about -0.12 of its potential returns per unit of risk. The Apartment Investment and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  758.00  in Apartment Investment and on March 5, 2024 and sell it today you would earn a total of  31.00  from holding Apartment Investment and or generate 4.09% return on investment over 90 days.

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

First Industrial Realty  vs.  Apartment Investment and

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.

Apartment Investment and

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Apartment Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Industrial and Apartment Investment

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

The idea behind First Industrial Realty and Apartment Investment and 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.