Correlation Between Rexford Industrial and Lexington Realty

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

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

Diversification Opportunities for Rexford Industrial and Lexington Realty

0.65

Correlation Coefficient

Rexford Industrial  Lexington Realty

Poor diversification

The 3 months correlation between Rexford and Lexington is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rexford Industrial Realty and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust and Rexford 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 Rexford Industrial Realty are associated (or correlated) with Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of Rexford Industrial i.e., Rexford Industrial and Lexington Realty go up and down completely randomly.

Pair Corralation between Rexford Industrial and Lexington Realty

Assuming the 90 days trading horizon Rexford Industrial is expected to generate 1.74 times less return on investment than Lexington Realty. But when comparing it to its historical volatility, Rexford Industrial Realty is 2.07 times less risky than Lexington Realty. It trades about 0.04 of its potential returns per unit of risk. Lexington Realty Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,866  in Lexington Realty Trust on August 31, 2024 and sell it today you would earn a total of  114.00  from holding Lexington Realty Trust or generate 2.34% return on investment over 90 days.

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

Rexford Industrial Realty  vs.  Lexington Realty Trust

Rexford Industrial Realty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rexford Industrial Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Rexford Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lexington Realty Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lexington Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lexington Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rexford Industrial and Lexington Realty

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

The idea behind Rexford Industrial Realty and Lexington 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.

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