Correlation Between Accelerate Arbitrage and First Trust

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

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

Diversification Opportunities for Accelerate Arbitrage and First Trust

0.36

Correlation Coefficient

Accelerate Arbitrage  First Trust

Weak diversification

The 3 months correlation between Accelerate and First is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Accelerate Arbitrage and First Trust AlphaDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust AlphaDEX and Accelerate Arbitrage 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 Accelerate Arbitrage 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 AlphaDEX has no effect on the direction of Accelerate Arbitrage i.e., Accelerate Arbitrage and First Trust go up and down completely randomly.

Pair Corralation between Accelerate Arbitrage and First Trust

Assuming the 90 days trading horizon Accelerate Arbitrage is expected to generate 2.6 times more return on investment than First Trust. However, Accelerate Arbitrage is 2.6 times more volatile than First Trust AlphaDEX. It trades about 0.02 of its potential returns per unit of risk. First Trust AlphaDEX is currently generating about 0.01 per unit of risk. If you would invest  2,380  in Accelerate Arbitrage on September 16, 2024 and sell it today you would earn a total of  250.00  from holding Accelerate Arbitrage or generate 10.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.34%
Values	Daily Returns

Accelerate Arbitrage  vs.  First Trust AlphaDEX

Accelerate Arbitrage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Accelerate Arbitrage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Accelerate Arbitrage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Trust AlphaDEX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust AlphaDEX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Accelerate Arbitrage and First Trust

The main advantage of trading using opposite Accelerate Arbitrage and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Accelerate Arbitrage 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 Accelerate Arbitrage and First Trust AlphaDEX 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.