Correlation Between Montea Comm and First Industrial

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

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

Diversification Opportunities for Montea Comm and First Industrial

0.34

Correlation Coefficient

Montea Comm  First Industrial

Weak diversification

The 3 months correlation between Montea and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Montea Comm VA 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 Montea Comm 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 Montea Comm VA 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 Montea Comm i.e., Montea Comm and First Industrial go up and down completely randomly.

Pair Corralation between Montea Comm and First Industrial

Assuming the 90 days horizon Montea Comm VA is expected to generate 1.03 times more return on investment than First Industrial. However, Montea Comm is 1.03 times more volatile than First Industrial Realty. It trades about -0.03 of its potential returns per unit of risk. First Industrial Realty is currently generating about -0.28 per unit of risk. If you would invest  6,250  in Montea Comm VA on October 15, 2024 and sell it today you would lose (40.00) from holding Montea Comm VA or give up 0.64% of portfolio value over 90 days.

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

Montea Comm VA  vs.  First Industrial Realty

Montea Comm VA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montea Comm VA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite nearly stable basic indicators, First Industrial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Montea Comm and First Industrial

The main advantage of trading using opposite Montea Comm and First Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montea Comm 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 Montea Comm VA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.