Correlation Between First Industrial and Vanguard Reit

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

Diversification Opportunities for First Industrial and Vanguard Reit

0.87

Correlation Coefficient

First Industrial  Vanguard Reit

Very poor diversification

The 3 months correlation between First and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Vanguard Reit Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Reit Index 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 Vanguard Reit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Reit Index has no effect on the direction of First Industrial i.e., First Industrial and Vanguard Reit go up and down completely randomly.

Pair Corralation between First Industrial and Vanguard Reit

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.21 times more return on investment than Vanguard Reit. However, First Industrial is 1.21 times more volatile than Vanguard Reit Index. It trades about 0.1 of its potential returns per unit of risk. Vanguard Reit Index is currently generating about 0.03 per unit of risk. If you would invest  4,971  in First Industrial Realty on December 28, 2024 and sell it today you would earn a total of  394.00  from holding First Industrial Realty or generate 7.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

First Industrial Realty  vs.  Vanguard Reit Index

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 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.

Vanguard Reit Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Reit Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vanguard Reit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Industrial and Vanguard Reit

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

The idea behind First Industrial Realty and Vanguard Reit Index 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.