Correlation Between First Industrial and Vornado Realty

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

Diversification Opportunities for First Industrial and Vornado Realty

-0.24

Correlation Coefficient

First Industrial  Vornado Realty

Very good diversification

The 3 months correlation between First and Vornado is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of First Industrial i.e., First Industrial and Vornado Realty go up and down completely randomly.

Pair Corralation between First Industrial and Vornado Realty

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.54 times more return on investment than Vornado Realty. However, First Industrial Realty is 1.86 times less risky than Vornado Realty. It trades about 0.11 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about -0.05 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  454.00  from holding First Industrial Realty or generate 9.13% return on investment over 90 days.

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

First Industrial Realty  vs.  Vornado Realty Trust

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 9 (%) 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.

Vornado Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with First Industrial and Vornado Realty

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

The idea behind First Industrial Realty and Vornado Realty Trust 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.