Correlation Between First Industrial and National Retail

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

Diversification Opportunities for First Industrial and National Retail

0.75

Correlation Coefficient

First Industrial  National Retail

Poor diversification

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

Pair Corralation between First Industrial and National Retail

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.94 times more return on investment than National Retail. However, First Industrial Realty is 1.07 times less risky than National Retail. It trades about 0.11 of its potential returns per unit of risk. National Retail Properties is currently generating about 0.07 per unit of risk. If you would invest  5,000  in First Industrial Realty on December 27, 2024 and sell it today you would earn a total of  425.00  from holding First Industrial Realty or generate 8.5% 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.  National Retail Properties

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.

National Retail Prop

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Retail Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, National Retail is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Industrial and National Retail

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

The idea behind First Industrial Realty and National Retail Properties 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.