Correlation Between Ab Global and First Trust

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

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

Diversification Opportunities for Ab Global and First Trust

0.82

Correlation Coefficient

Ab Global  First Trust

Very poor diversification

The 3 months correlation between CABIX and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk 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 Ab Global 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 Ab Global Risk 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 Ab Global i.e., Ab Global and First Trust go up and down completely randomly.

Pair Corralation between Ab Global and First Trust

Assuming the 90 days horizon Ab Global Risk is expected to under-perform the First Trust. In addition to that, Ab Global is 8.68 times more volatile than First Trust Managed. It trades about -0.11 of its total potential returns per unit of risk. First Trust Managed is currently generating about -0.06 per unit of volatility. If you would invest  2,068  in First Trust Managed on December 3, 2024 and sell it today you would lose (14.00) from holding First Trust Managed or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ab Global Risk  vs.  First Trust Managed

Ab Global Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Global Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

First Trust Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ab Global and First Trust

The main advantage of trading using opposite Ab Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global 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 Ab Global Risk 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.