Correlation Between Invesco Real and First Industrial

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

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

Diversification Opportunities for Invesco Real and First Industrial

0.75

Correlation Coefficient

Invesco Real  First Industrial

Poor diversification

The 3 months correlation between Invesco and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Real Estate 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 Invesco Real 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 Invesco Real Estate 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 Invesco Real i.e., Invesco Real and First Industrial go up and down completely randomly.

Pair Corralation between Invesco Real and First Industrial

Assuming the 90 days horizon Invesco Real Estate is expected to under-perform the First Industrial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Real Estate is 1.1 times less risky than First Industrial. The mutual fund trades about -0.19 of its potential returns per unit of risk. The First Industrial Realty is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  5,514  in First Industrial Realty on September 20, 2024 and sell it today you would lose (555.00) from holding First Industrial Realty or give up 10.07% of portfolio value over 90 days.

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

Invesco Real Estate  vs.  First Industrial Realty

Invesco Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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.

Pair Trading with Invesco Real and First Industrial

The main advantage of trading using opposite Invesco Real and First Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Real 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 Invesco Real Estate 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.