Correlation Between Equinix and First Industrial

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

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

Diversification Opportunities for Equinix and First Industrial

-0.66

Correlation Coefficient

Equinix  First Industrial

Excellent diversification

The 3 months correlation between Equinix and First is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Equinix 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 Equinix 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 Equinix 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 Equinix i.e., Equinix and First Industrial go up and down completely randomly.

Pair Corralation between Equinix and First Industrial

Given the investment horizon of 90 days Equinix is expected to generate 1.03 times more return on investment than First Industrial. However, Equinix is 1.03 times more volatile than First Industrial Realty. It trades about 0.17 of its potential returns per unit of risk. First Industrial Realty is currently generating about -0.08 per unit of risk. If you would invest  86,025  in Equinix on September 17, 2024 and sell it today you would earn a total of  10,475  from holding Equinix or generate 12.18% return on investment over 90 days.

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

Equinix  vs.  First Industrial Realty

Equinix

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 relatively invariable basic indicators, First Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Equinix and First Industrial

The main advantage of trading using opposite Equinix and First Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.