Correlation Between Breakwave Dry and First Trust

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

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

Diversification Opportunities for Breakwave Dry and First Trust

-0.46

Correlation Coefficient

Breakwave Dry  First Trust

Very good diversification

The 3 months correlation between Breakwave and First is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Breakwave Dry Bulk and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Breakwave Dry 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 Breakwave Dry Bulk 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 Nasdaq has no effect on the direction of Breakwave Dry i.e., Breakwave Dry and First Trust go up and down completely randomly.

Pair Corralation between Breakwave Dry and First Trust

Given the investment horizon of 90 days Breakwave Dry Bulk is expected to under-perform the First Trust. In addition to that, Breakwave Dry is 3.17 times more volatile than First Trust Nasdaq. It trades about -0.1 of its total potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.13 per unit of volatility. If you would invest  3,236  in First Trust Nasdaq on October 22, 2024 and sell it today you would earn a total of  342.00  from holding First Trust Nasdaq or generate 10.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Breakwave Dry Bulk  vs.  First Trust Nasdaq

Breakwave Dry Bulk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Breakwave Dry Bulk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

First Trust Nasdaq

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Breakwave Dry and First Trust

The main advantage of trading using opposite Breakwave Dry and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Breakwave Dry 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 Breakwave Dry Bulk and First Trust Nasdaq 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.