Correlation Between Cardano and First Trust

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

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

Diversification Opportunities for Cardano and First Trust

0.53

Correlation Coefficient

Cardano  First Trust

Very weak diversification

The 3 months correlation between Cardano and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and First Trust Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Active and Cardano 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 Cardano are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Active has no effect on the direction of Cardano i.e., Cardano and First Trust go up and down completely randomly.

Pair Corralation between Cardano and First Trust

Assuming the 90 days trading horizon Cardano is expected to generate 7.09 times more return on investment than First Trust. However, Cardano is 7.09 times more volatile than First Trust Active. It trades about 0.29 of its potential returns per unit of risk. First Trust Active is currently generating about 0.01 per unit of risk. If you would invest  34.00  in Cardano on October 9, 2024 and sell it today you would earn a total of  75.00  from holding Cardano or generate 220.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Cardano  vs.  First Trust Active

Cardano

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardano are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cardano exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Trust Active

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Active has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cardano and First Trust

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

The idea behind Cardano and First Trust Active 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.