Correlation Between Calamos Laddered and First Trust

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

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

Diversification Opportunities for Calamos Laddered and First Trust

0.89

Correlation Coefficient

Calamos Laddered  First Trust

Very poor diversification

The 3 months correlation between Calamos and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Calamos Laddered SP and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Calamos Laddered 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 Calamos Laddered SP 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 Cboe has no effect on the direction of Calamos Laddered i.e., Calamos Laddered and First Trust go up and down completely randomly.

Pair Corralation between Calamos Laddered and First Trust

Given the investment horizon of 90 days Calamos Laddered is expected to generate 1.71 times less return on investment than First Trust. But when comparing it to its historical volatility, Calamos Laddered SP is 2.27 times less risky than First Trust. It trades about 0.23 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,033  in First Trust Cboe on October 20, 2024 and sell it today you would earn a total of  49.00  from holding First Trust Cboe or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Calamos Laddered SP  vs.  First Trust Cboe

Calamos Laddered

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calamos Laddered SP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Calamos Laddered is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Trust Cboe

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Cboe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Calamos Laddered and First Trust

The main advantage of trading using opposite Calamos Laddered and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calamos Laddered 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 Calamos Laddered SP and First Trust Cboe 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.