Correlation Between First Industrial and Ke Holdings

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

Diversification Opportunities for First Industrial and Ke Holdings

0.75

Correlation Coefficient

First Industrial  Ke Holdings

Poor diversification

The 3 months correlation between First and BEKE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Ke Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ke Holdings 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 Ke Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ke Holdings has no effect on the direction of First Industrial i.e., First Industrial and Ke Holdings go up and down completely randomly.

Pair Corralation between First Industrial and Ke Holdings

Allowing for the 90-day total investment horizon First Industrial is expected to generate 1.93 times less return on investment than Ke Holdings. But when comparing it to its historical volatility, First Industrial Realty is 2.63 times less risky than Ke Holdings. It trades about 0.09 of its potential returns per unit of risk. Ke Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,852  in Ke Holdings on December 26, 2024 and sell it today you would earn a total of  217.00  from holding Ke Holdings or generate 11.72% 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.  Ke Holdings

First Industrial Realty

Risk-Adjusted Performance

Modest

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 April 2025.

Ke Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ke Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, Ke Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Industrial and Ke Holdings

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

The idea behind First Industrial Realty and Ke Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.