Correlation Between Rexford Industrial and Terreno Realty

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

Diversification Opportunities for Rexford Industrial and Terreno Realty

-0.12

Correlation Coefficient

Rexford Industrial  Terreno Realty

Good diversification

The 3 months correlation between Rexford and Terreno is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rexford Industrial Realty and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Rexford Industrial i.e., Rexford Industrial and Terreno Realty go up and down completely randomly.

Pair Corralation between Rexford Industrial and Terreno Realty

Assuming the 90 days trading horizon Rexford Industrial is expected to generate 8.32 times less return on investment than Terreno Realty. But when comparing it to its historical volatility, Rexford Industrial Realty is 2.08 times less risky than Terreno Realty. It trades about 0.03 of its potential returns per unit of risk. Terreno Realty is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,016  in Terreno Realty on November 29, 2024 and sell it today you would earn a total of  665.00  from holding Terreno Realty or generate 11.05% return on investment over 90 days.

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

Rexford Industrial Realty  vs.  Terreno Realty

Rexford Industrial Realty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rexford Industrial Realty are ranked lower than 2 (%) 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.

Terreno Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terreno Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Terreno Realty may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Rexford Industrial and Terreno Realty

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

The idea behind Rexford Industrial Realty and Terreno 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.