Correlation Between Power REIT and First Industrial

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

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

Diversification Opportunities for Power REIT and First Industrial

0.68

Correlation Coefficient

Power REIT  First Industrial

Poor diversification

The 3 months correlation between Power and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT 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 Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and First Industrial go up and down completely randomly.

Pair Corralation between Power REIT and First Industrial

Allowing for the 90-day total investment horizon Power REIT is expected to generate 7.87 times more return on investment than First Industrial. However, Power REIT is 7.87 times more volatile than First Industrial Realty. It trades about 0.14 of its potential returns per unit of risk. First Industrial Realty is currently generating about -0.21 per unit of risk. If you would invest  53.00  in Power REIT on February 10, 2024 and sell it today you would earn a total of  16.00  from holding Power REIT or generate 30.19% return on investment over 90 days.

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

Power REIT  vs.  First Industrial Realty

Power REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Power REIT and First Industrial

The main advantage of trading using opposite Power REIT and First Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.