Correlation Between First Trust and Robo Global

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

Diversification Opportunities for First Trust and Robo Global

0.75

Correlation Coefficient

First Trust  Robo Global

Poor diversification

The 3 months correlation between First and Robo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Robo Global Artificial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robo Global Artificial 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 Robo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robo Global Artificial has no effect on the direction of First Trust i.e., First Trust and Robo Global go up and down completely randomly.

Pair Corralation between First Trust and Robo Global

Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 0.84 times more return on investment than Robo Global. However, First Trust NASDAQ is 1.19 times less risky than Robo Global. It trades about 0.05 of its potential returns per unit of risk. Robo Global Artificial is currently generating about -0.05 per unit of risk. If you would invest  6,454  in First Trust NASDAQ on December 27, 2024 and sell it today you would earn a total of  224.00  from holding First Trust NASDAQ or generate 3.47% return on investment over 90 days.

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

First Trust NASDAQ  vs.  Robo Global Artificial

First Trust NASDAQ

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 3 (%) 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.

Robo Global Artificial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Robo Global Artificial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Robo Global is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Robo Global

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

The idea behind First Trust NASDAQ and Robo Global Artificial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.