Correlation Between First Industrial and Sterling Capital

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

Diversification Opportunities for First Industrial and Sterling Capital

0.56

Correlation Coefficient

First Industrial  Sterling Capital

Very weak diversification

The 3 months correlation between First and Sterling is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Sterling Capital Stratton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Stratton 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Stratton has no effect on the direction of First Industrial i.e., First Industrial and Sterling Capital go up and down completely randomly.

Pair Corralation between First Industrial and Sterling Capital

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.02 times more return on investment than Sterling Capital. However, First Industrial is 1.02 times more volatile than Sterling Capital Stratton. It trades about -0.12 of its potential returns per unit of risk. Sterling Capital Stratton is currently generating about -0.15 per unit of risk. If you would invest  5,590  in First Industrial Realty on September 16, 2024 and sell it today you would lose (310.00) from holding First Industrial Realty or give up 5.55% of portfolio value over 90 days.

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

First Industrial Realty  vs.  Sterling Capital Stratton

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.

Sterling Capital Stratton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Stratton has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with First Industrial and Sterling Capital

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

The idea behind First Industrial Realty and Sterling Capital Stratton 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.