Correlation Between ASPY and First Trust

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

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

Diversification Opportunities for ASPY and First Trust

0.14

Correlation Coefficient

ASPY  First Trust

Average diversification

The 3 months correlation between ASPY and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ASPY and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and ASPY 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 ASPY 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 Managed has no effect on the direction of ASPY i.e., ASPY and First Trust go up and down completely randomly.

Pair Corralation between ASPY and First Trust

If you would invest  4,770  in First Trust Managed on October 22, 2024 and sell it today you would earn a total of  40.00  from holding First Trust Managed or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	10.53%
Values	Daily Returns

ASPY  vs.  First Trust Managed

ASPY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASPY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ASPY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Managed

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASPY and First Trust

The main advantage of trading using opposite ASPY and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASPY 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 ASPY and First Trust Managed 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.