Correlation Between Trust For and First Trust

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

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

Diversification Opportunities for Trust For and First Trust

0.93

Correlation Coefficient

Trust For  First Trust

Almost no diversification

The 3 months correlation between Trust and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Trust For Professional and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort and Trust For 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 Trust For Professional 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 LongShort has no effect on the direction of Trust For i.e., Trust For and First Trust go up and down completely randomly.

Pair Corralation between Trust For and First Trust

Given the investment horizon of 90 days Trust For is expected to generate 1.74 times less return on investment than First Trust. In addition to that, Trust For is 2.54 times more volatile than First Trust LongShort. It trades about 0.07 of its total potential returns per unit of risk. First Trust LongShort is currently generating about 0.3 per unit of volatility. If you would invest  6,537  in First Trust LongShort on September 17, 2024 and sell it today you would earn a total of  153.00  from holding First Trust LongShort or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Trust For Professional  vs.  First Trust LongShort

Trust For Professional

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trust For Professional are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Trust For may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust LongShort

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Trust For and First Trust

The main advantage of trading using opposite Trust For and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trust For 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 Trust For Professional and First Trust LongShort 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.