Correlation Between First Industrial and COPT Defense

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

Diversification Opportunities for First Industrial and COPT Defense

-0.52

Correlation Coefficient

First Industrial  COPT Defense

Excellent diversification

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

Pair Corralation between First Industrial and COPT Defense

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the COPT Defense. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.15 times less risky than COPT Defense. The stock trades about -0.1 of its potential returns per unit of risk. The COPT Defense Properties is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,190  in COPT Defense Properties on September 19, 2024 and sell it today you would lose (25.00) from holding COPT Defense Properties or give up 0.78% of portfolio value over 90 days.

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

First Industrial Realty  vs.  COPT Defense 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 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.

COPT Defense Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, COPT Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Industrial and COPT Defense

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

The idea behind First Industrial Realty and COPT Defense 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.