Correlation Between First Industrial and Invitation Homes

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

Diversification Opportunities for First Industrial and Invitation Homes

0.76

Correlation Coefficient

First Industrial  Invitation Homes

Poor diversification

The 3 months correlation between First and Invitation is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of First Industrial i.e., First Industrial and Invitation Homes go up and down completely randomly.

Pair Corralation between First Industrial and Invitation Homes

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 0.79 times more return on investment than Invitation Homes. However, First Industrial Realty is 1.27 times less risky than Invitation Homes. It trades about -0.11 of its potential returns per unit of risk. Invitation Homes is currently generating about -0.11 per unit of risk. If you would invest  5,630  in First Industrial Realty on September 19, 2024 and sell it today you would lose (429.00) from holding First Industrial Realty or give up 7.62% of portfolio value over 90 days.

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

First Industrial Realty  vs.  Invitation Homes

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.

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Industrial and Invitation Homes

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

The idea behind First Industrial Realty and Invitation Homes 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.