Correlation Between Nasdaq and First Industrial

Can any of the company-specific risk be diversified away by investing in both Nasdaq and First Industrial 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 Nasdaq and First Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq Inc and First Industrial Realty, you can compare the effects of market volatilities on Nasdaq and First Industrial 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 Nasdaq with a short position of First Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and First Industrial.

Diversification Opportunities for Nasdaq and First Industrial

0.24

Correlation Coefficient

Nasdaq  First Industrial

Modest diversification

The 3 months correlation between Nasdaq and First is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty and Nasdaq 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 Nasdaq Inc are associated (or correlated) with First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of Nasdaq i.e., Nasdaq and First Industrial go up and down completely randomly.

Pair Corralation between Nasdaq and First Industrial

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.96 times more return on investment than First Industrial. However, Nasdaq Inc is 1.04 times less risky than First Industrial. It trades about 0.2 of its potential returns per unit of risk. First Industrial Realty is currently generating about 0.08 per unit of risk. If you would invest  5,911  in Nasdaq Inc on September 27, 2024 and sell it today you would earn a total of  1,981  from holding Nasdaq Inc or generate 33.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.43%
Values	Daily Returns

Nasdaq Inc  vs.  First Industrial Realty

Nasdaq Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite nearly stable basic indicators, First Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nasdaq and First Industrial

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

The idea behind Nasdaq Inc and First Industrial Realty 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.