Correlation Between First Industrial and Bluerock Homes

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

Diversification Opportunities for First Industrial and Bluerock Homes

-0.66

Correlation Coefficient

First Industrial  Bluerock Homes

Excellent diversification

The 3 months correlation between First and Bluerock is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Bluerock Homes Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluerock Homes Trust 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 Bluerock Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluerock Homes Trust has no effect on the direction of First Industrial i.e., First Industrial and Bluerock Homes go up and down completely randomly.

Pair Corralation between First Industrial and Bluerock Homes

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.8 times more return on investment than Bluerock Homes. However, First Industrial Realty is 1.25 times less risky than Bluerock Homes. It trades about 0.0 of its potential returns per unit of risk. Bluerock Homes Trust is currently generating about -0.03 per unit of risk. If you would invest  4,697  in First Industrial Realty on March 7, 2024 and sell it today you would lose (10.00) from holding First Industrial Realty or give up 0.21% of portfolio value over 90 days.

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

First Industrial Realty  vs.  Bluerock Homes Trust

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 unfluctuating 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.

Bluerock Homes Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bluerock Homes Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Bluerock Homes displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Industrial and Bluerock Homes

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

The idea behind First Industrial Realty and Bluerock Homes Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.