Correlation Between First Trust and ALPS Disruptive

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

By analyzing existing cross correlation between First Trust NASDAQ and ALPS Disruptive Technologies, you can compare the effects of market volatilities on First Trust and ALPS Disruptive 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 ALPS Disruptive. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ALPS Disruptive.

Diversification Opportunities for First Trust and ALPS Disruptive

0.86

Correlation Coefficient

First Trust  ALPS Disruptive

Very poor diversification

The 3 months correlation between First and ALPS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and ALPS Disruptive Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Disruptive Tech 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 NASDAQ are associated (or correlated) with ALPS Disruptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Disruptive Tech has no effect on the direction of First Trust i.e., First Trust and ALPS Disruptive go up and down completely randomly.

Pair Corralation between First Trust and ALPS Disruptive

Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 1.37 times more return on investment than ALPS Disruptive. However, First Trust is 1.37 times more volatile than ALPS Disruptive Technologies. It trades about 0.02 of its potential returns per unit of risk. ALPS Disruptive Technologies is currently generating about -0.03 per unit of risk. If you would invest  6,381  in First Trust NASDAQ on December 28, 2024 and sell it today you would earn a total of  80.00  from holding First Trust NASDAQ or generate 1.25% return on investment over 90 days.

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

First Trust NASDAQ  vs.  ALPS Disruptive Technologies

First Trust NASDAQ

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ALPS Disruptive Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPS Disruptive Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ALPS Disruptive is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and ALPS Disruptive

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

The idea behind First Trust NASDAQ and ALPS Disruptive Technologies 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.