Correlation Between First Industrial and SILICON LABORATOR

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

Diversification Opportunities for First Industrial and SILICON LABORATOR

0.64

Correlation Coefficient

First Industrial  SILICON LABORATOR

Poor diversification

The 3 months correlation between First and SILICON is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and SILICON LABORATOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILICON LABORATOR 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 SILICON LABORATOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILICON LABORATOR has no effect on the direction of First Industrial i.e., First Industrial and SILICON LABORATOR go up and down completely randomly.

Pair Corralation between First Industrial and SILICON LABORATOR

Assuming the 90 days horizon First Industrial Realty is expected to generate 0.51 times more return on investment than SILICON LABORATOR. However, First Industrial Realty is 1.96 times less risky than SILICON LABORATOR. It trades about 0.05 of its potential returns per unit of risk. SILICON LABORATOR is currently generating about -0.01 per unit of risk. If you would invest  4,803  in First Industrial Realty on December 21, 2024 and sell it today you would earn a total of  197.00  from holding First Industrial Realty or generate 4.1% return on investment over 90 days.

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

First Industrial Realty  vs.  SILICON LABORATOR

First Industrial Realty

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Industrial Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SILICON LABORATOR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SILICON LABORATOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SILICON LABORATOR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Industrial and SILICON LABORATOR

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

The idea behind First Industrial Realty and SILICON LABORATOR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.