Correlation Between First Trust and BKES

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

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

Diversification Opportunities for First Trust and BKES

0.69

Correlation Coefficient

First Trust  BKES

Poor diversification

The 3 months correlation between First and BKES is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and BKES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKES and First Trust 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 First Trust S Network are associated (or correlated) with BKES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKES has no effect on the direction of First Trust i.e., First Trust and BKES go up and down completely randomly.

Pair Corralation between First Trust and BKES

Given the investment horizon of 90 days First Trust S Network is expected to generate 1.53 times more return on investment than BKES. However, First Trust is 1.53 times more volatile than BKES. It trades about 0.07 of its potential returns per unit of risk. BKES is currently generating about -0.02 per unit of risk. If you would invest  1,993  in First Trust S Network on October 12, 2024 and sell it today you would earn a total of  832.00  from holding First Trust S Network or generate 41.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.66%
Values	Daily Returns

First Trust S Network  vs.  BKES

First Trust S

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BKES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BKES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BKES is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and BKES

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

The idea behind First Trust S Network and BKES 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.