Correlation Between CareTrust REIT and First Industrial

Can any of the company-specific risk be diversified away by investing in both CareTrust REIT and First Industrial 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 CareTrust REIT and First Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CareTrust REIT and First Industrial Realty, you can compare the effects of market volatilities on CareTrust REIT and First Industrial 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 CareTrust REIT with a short position of First Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareTrust REIT and First Industrial.

Diversification Opportunities for CareTrust REIT and First Industrial

-0.18

Correlation Coefficient

CareTrust REIT  First Industrial

Good diversification

The 3 months correlation between CareTrust and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust REIT and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty and CareTrust REIT 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 CareTrust REIT are associated (or correlated) with First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of CareTrust REIT i.e., CareTrust REIT and First Industrial go up and down completely randomly.

Pair Corralation between CareTrust REIT and First Industrial

Given the investment horizon of 90 days CareTrust REIT is expected to under-perform the First Industrial. In addition to that, CareTrust REIT is 1.2 times more volatile than First Industrial Realty. It trades about -0.12 of its total potential returns per unit of risk. First Industrial Realty is currently generating about 0.1 per unit of volatility. If you would invest  5,306  in First Industrial Realty on November 29, 2024 and sell it today you would earn a total of  392.00  from holding First Industrial Realty or generate 7.39% return on investment over 90 days.

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

CareTrust REIT  vs.  First Industrial Realty

CareTrust REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CareTrust REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

First Industrial Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Industrial Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Industrial may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with CareTrust REIT and First Industrial

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

The idea behind CareTrust REIT and First Industrial Realty 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.