Correlation Between Weyerhaeuser and First Industrial

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

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

Diversification Opportunities for Weyerhaeuser and First Industrial

0.73

Correlation Coefficient

Weyerhaeuser  First Industrial

Poor diversification

The 3 months correlation between Weyerhaeuser and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser 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 Weyerhaeuser 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 Weyerhaeuser 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 Weyerhaeuser i.e., Weyerhaeuser and First Industrial go up and down completely randomly.

Pair Corralation between Weyerhaeuser and First Industrial

Allowing for the 90-day total investment horizon Weyerhaeuser is expected to under-perform the First Industrial. In addition to that, Weyerhaeuser is 1.29 times more volatile than First Industrial Realty. It trades about -0.15 of its total potential returns per unit of risk. First Industrial Realty is currently generating about -0.11 per unit of volatility. If you would invest  5,630  in First Industrial Realty on September 19, 2024 and sell it today you would lose (426.00) from holding First Industrial Realty or give up 7.57% of portfolio value over 90 days.

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

Weyerhaeuser  vs.  First Industrial Realty

Weyerhaeuser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyerhaeuser has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Weyerhaeuser and First Industrial

The main advantage of trading using opposite Weyerhaeuser and First Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyerhaeuser 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 Weyerhaeuser 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.