Correlation Between First Industrial and Vornado Realty

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Can any of the company-specific risk be diversified away by investing in both First Industrial and Vornado 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 First Industrial and Vornado Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Industrial Realty and Vornado Realty Trust, you can compare the effects of market volatilities on First Industrial and Vornado 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 First Industrial with a short position of Vornado Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Vornado Realty.

Diversification Opportunities for First Industrial and Vornado Realty

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Vornado is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust and First 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 First Industrial Realty are associated (or correlated) with Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of First Industrial i.e., First Industrial and Vornado Realty go up and down completely randomly.

Pair Corralation between First Industrial and Vornado Realty

Allowing for the 90-day total investment horizon First Industrial is expected to generate 1.99 times less return on investment than Vornado Realty. But when comparing it to its historical volatility, First Industrial Realty is 1.17 times less risky than Vornado Realty. It trades about 0.03 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,362  in Vornado Realty Trust on September 6, 2024 and sell it today you would earn a total of  460.00  from holding Vornado Realty Trust or generate 33.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Industrial Realty  vs.  Vornado Realty Trust

 Performance 
       Timeline  
First Industrial Realty 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 relatively invariable basic indicators, First Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
Vornado Realty Trust 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vornado Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vornado Realty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Industrial and Vornado Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Industrial and Vornado Realty

The main advantage of trading using opposite First Industrial and Vornado Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial position performs unexpectedly, Vornado 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 Vornado Realty will offset losses from the drop in Vornado Realty's long position.
The idea behind First Industrial Realty and Vornado 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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