Correlation Between First Industrial and Regency Centers

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

Diversification Opportunities for First Industrial and Regency Centers

-0.36

Correlation Coefficient

First Industrial  Regency Centers

Very good diversification

The 3 months correlation between First and Regency is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Regency Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regency Centers 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 Regency Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regency Centers has no effect on the direction of First Industrial i.e., First Industrial and Regency Centers go up and down completely randomly.

Pair Corralation between First Industrial and Regency Centers

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Regency Centers. In addition to that, First Industrial is 1.34 times more volatile than Regency Centers. It trades about -0.07 of its total potential returns per unit of risk. Regency Centers is currently generating about -0.02 per unit of volatility. If you would invest  2,487  in Regency Centers on September 4, 2024 and sell it today you would lose (21.00) from holding Regency Centers or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

First Industrial Realty  vs.  Regency Centers

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.

Regency Centers

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Regency Centers are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Regency Centers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Industrial and Regency Centers

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

The idea behind First Industrial Realty and Regency Centers 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.