Correlation Between Franklin Street and First Industrial

Can any of the company-specific risk be diversified away by investing in both Franklin Street and First Industrial 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 Franklin Street and First Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Street Properties and First Industrial Realty, you can compare the effects of market volatilities on Franklin Street and First Industrial 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 Franklin Street with a short position of First Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Street and First Industrial.

Diversification Opportunities for Franklin Street and First Industrial

0.37

Correlation Coefficient

Franklin Street  First Industrial

Weak diversification

The 3 months correlation between Franklin and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Street Properties and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty and Franklin Street 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 Franklin Street Properties are associated (or correlated) with First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of Franklin Street i.e., Franklin Street and First Industrial go up and down completely randomly.

Pair Corralation between Franklin Street and First Industrial

Considering the 90-day investment horizon Franklin Street is expected to generate 1.79 times less return on investment than First Industrial. In addition to that, Franklin Street is 2.19 times more volatile than First Industrial Realty. It trades about 0.01 of its total potential returns per unit of risk. First Industrial Realty is currently generating about 0.03 per unit of volatility. If you would invest  4,883  in First Industrial Realty on December 5, 2024 and sell it today you would earn a total of  781.00  from holding First Industrial Realty or generate 15.99% return on investment over 90 days.

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

Franklin Street Properties  vs.  First Industrial Realty

Franklin Street Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franklin Street is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Franklin Street and First Industrial

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

The idea behind Franklin Street Properties and First Industrial Realty 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.