Correlation Between First Industrial and Net Lease

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

Diversification Opportunities for First Industrial and Net Lease

-0.31

Correlation Coefficient

First Industrial  Net Lease

Very good diversification

The 3 months correlation between First and Net is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office 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 Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of First Industrial i.e., First Industrial and Net Lease go up and down completely randomly.

Pair Corralation between First Industrial and Net Lease

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the Net Lease. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.26 times less risky than Net Lease. The stock trades about -0.26 of its potential returns per unit of risk. The Net Lease Office is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Net Lease Office on September 24, 2024 and sell it today you would lose (65.00) from holding Net Lease Office or give up 2.06% of portfolio value over 90 days.

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

First Industrial Realty  vs.  Net Lease Office

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 unfluctuating 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.

Net Lease Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Net Lease Office has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Net Lease is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Industrial and Net Lease

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

The idea behind First Industrial Realty and Net Lease Office 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.