Correlation Between First Trust and BKIS

Can any of the company-specific risk be diversified away by investing in both First Trust and BKIS 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 BKIS 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 BKIS, you can compare the effects of market volatilities on First Trust and BKIS 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 BKIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BKIS.

Diversification Opportunities for First Trust and BKIS

0.27

Correlation Coefficient

First Trust  BKIS

Modest diversification

The 3 months correlation between First and BKIS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and BKIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKIS 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 BKIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKIS has no effect on the direction of First Trust i.e., First Trust and BKIS go up and down completely randomly.

Pair Corralation between First Trust and BKIS

Given the investment horizon of 90 days First Trust S Network is expected to generate 1.44 times more return on investment than BKIS. However, First Trust is 1.44 times more volatile than BKIS. It trades about 0.07 of its potential returns per unit of risk. BKIS is currently generating about 0.04 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	Very Weak
Accuracy	25.66%
Values	Daily Returns

First Trust S Network  vs.  BKIS

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.

BKIS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and BKIS

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

The idea behind First Trust S Network and BKIS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.