Correlation Between First Industrial and CBL Associates

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

Diversification Opportunities for First Industrial and CBL Associates

-0.52

Correlation Coefficient

First Industrial  CBL Associates

Excellent diversification

The 3 months correlation between First and CBL is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and CBL Associates Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBL Associates Properties 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 CBL Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBL Associates Properties has no effect on the direction of First Industrial i.e., First Industrial and CBL Associates go up and down completely randomly.

Pair Corralation between First Industrial and CBL Associates

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the CBL Associates. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.27 times less risky than CBL Associates. The stock trades about -0.08 of its potential returns per unit of risk. The CBL Associates Properties is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,545  in CBL Associates Properties on September 2, 2024 and sell it today you would earn a total of  545.00  from holding CBL Associates Properties or generate 21.41% return on investment over 90 days.

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

First Industrial Realty  vs.  CBL Associates Properties

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 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.

CBL Associates Properties

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CBL Associates Properties are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, CBL Associates disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Industrial and CBL Associates

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

The idea behind First Industrial Realty and CBL Associates Properties 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.