Correlation Between First Industrial and Invitation Homes

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

Diversification Opportunities for First Industrial and Invitation Homes

0.58

Correlation Coefficient

First Industrial  Invitation Homes

Very weak diversification

The 3 months correlation between First and Invitation is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of First Industrial i.e., First Industrial and Invitation Homes go up and down completely randomly.

Pair Corralation between First Industrial and Invitation Homes

Allowing for the 90-day total investment horizon First Industrial is expected to generate 1.01 times less return on investment than Invitation Homes. In addition to that, First Industrial is 1.02 times more volatile than Invitation Homes. It trades about 0.11 of its total potential returns per unit of risk. Invitation Homes is currently generating about 0.12 per unit of volatility. If you would invest  3,156  in Invitation Homes on December 29, 2024 and sell it today you would earn a total of  291.00  from holding Invitation Homes or generate 9.22% return on investment over 90 days.

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

First Industrial Realty  vs.  Invitation Homes

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 8 (%) 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.

Invitation Homes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invitation Homes are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Invitation Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Industrial and Invitation Homes

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

The idea behind First Industrial Realty and Invitation Homes 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.