Correlation Between First Industrial and EastGroup Properties
Can any of the company-specific risk be diversified away by investing in both First Industrial and EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties, you can compare the effects of market volatilities on First Industrial and EastGroup Properties 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 EastGroup Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and EastGroup Properties.
Diversification Opportunities for First Industrial and EastGroup Properties
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and EastGroup is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of First Industrial i.e., First Industrial and EastGroup Properties go up and down completely randomly.
Pair Corralation between First Industrial and EastGroup Properties
Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.02 times more return on investment than EastGroup Properties. However, First Industrial is 1.02 times more volatile than EastGroup Properties. It trades about -0.16 of its potential returns per unit of risk. EastGroup Properties is currently generating about -0.23 per unit of risk. If you would invest 5,126 in First Industrial Realty on January 18, 2024 and sell it today you would lose (266.00) from holding First Industrial Realty or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. EastGroup Properties
Performance |
| Timeline |
| First Industrial Realty |
| EastGroup Properties |
First Industrial and EastGroup Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and EastGroup Properties
The main advantage of trading using opposite First Industrial and EastGroup Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, EastGroup Properties 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 EastGroup Properties will offset losses from the drop in EastGroup Properties' long position.| First Industrial vs. Terreno Realty | First Industrial vs. Plymouth Industrial REIT | First Industrial vs. LXP Industrial Trust | First Industrial vs. Rexford Industrial Realty |
| EastGroup Properties vs. Terreno Realty | EastGroup Properties vs. Plymouth Industrial REIT | EastGroup Properties vs. LXP Industrial Trust | EastGroup Properties vs. Rexford Industrial Realty |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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