Correlation Between Binance Coin and First Trust

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

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

Diversification Opportunities for Binance Coin and First Trust

0.34

Correlation Coefficient

Binance Coin  First Trust

Weak diversification

The 3 months correlation between Binance and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin 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 Binance Coin 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 Binance Coin 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 Binance Coin i.e., Binance Coin and First Trust go up and down completely randomly.

Pair Corralation between Binance Coin and First Trust

Assuming the 90 days trading horizon Binance Coin is expected to generate 3.1 times more return on investment than First Trust. However, Binance Coin is 3.1 times more volatile than First Trust Active. It trades about 0.05 of its potential returns per unit of risk. First Trust Active is currently generating about 0.07 per unit of risk. If you would invest  60,233  in Binance Coin on October 9, 2024 and sell it today you would earn a total of  12,737  from holding Binance Coin or generate 21.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

Binance Coin  vs.  First Trust Active

Binance Coin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin 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 Binance Coin and First Trust

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

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.