Correlation Between Six Circles and First Trust

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

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

Diversification Opportunities for Six Circles and First Trust

-0.4

Correlation Coefficient

Six Circles  First Trust

Very good diversification

The 3 months correlation between Six and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Six Circles Unconstrained and First Trust Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Eurozone and Six Circles 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 Six Circles Unconstrained 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 Eurozone has no effect on the direction of Six Circles i.e., Six Circles and First Trust go up and down completely randomly.

Pair Corralation between Six Circles and First Trust

Assuming the 90 days horizon Six Circles Unconstrained is expected to under-perform the First Trust. But the mutual fund apears to be less risky and, when comparing its historical volatility, Six Circles Unconstrained is 1.23 times less risky than First Trust. The mutual fund trades about -0.09 of its potential returns per unit of risk. The First Trust Eurozone is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,075  in First Trust Eurozone on December 17, 2024 and sell it today you would earn a total of  818.00  from holding First Trust Eurozone or generate 20.07% return on investment over 90 days.

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

Six Circles Unconstrained  vs.  First Trust Eurozone

Six Circles Unconstrained

Risk-Adjusted Performance

Very Weak

Over the last 90 days Six Circles Unconstrained has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Six Circles is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Eurozone

Risk-Adjusted Performance

Solid

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

Pair Trading with Six Circles and First Trust

The main advantage of trading using opposite Six Circles and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Six Circles 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 Six Circles Unconstrained and First Trust Eurozone 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.