Correlation Between First Trust and AdvisorShares Ranger

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

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

Diversification Opportunities for First Trust and AdvisorShares Ranger

-0.94

Correlation Coefficient

First Trust  AdvisorShares Ranger

Pay attention - limited upside

The 3 months correlation between First and AdvisorShares is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and AdvisorShares Ranger Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Ranger 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 SkyBridge are associated (or correlated) with AdvisorShares Ranger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Ranger has no effect on the direction of First Trust i.e., First Trust and AdvisorShares Ranger go up and down completely randomly.

Pair Corralation between First Trust and AdvisorShares Ranger

Given the investment horizon of 90 days First Trust SkyBridge is expected to generate 5.15 times more return on investment than AdvisorShares Ranger. However, First Trust is 5.15 times more volatile than AdvisorShares Ranger Equity. It trades about 0.34 of its potential returns per unit of risk. AdvisorShares Ranger Equity is currently generating about -0.36 per unit of risk. If you would invest  1,331  in First Trust SkyBridge on September 4, 2024 and sell it today you would earn a total of  713.00  from holding First Trust SkyBridge or generate 53.57% return on investment over 90 days.

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

First Trust SkyBridge  vs.  AdvisorShares Ranger Equity

First Trust SkyBridge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SkyBridge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

AdvisorShares Ranger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares Ranger Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with First Trust and AdvisorShares Ranger

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

The idea behind First Trust SkyBridge and AdvisorShares Ranger Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.