Correlation Between First Trust and Alexis Practical

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

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

Diversification Opportunities for First Trust and Alexis Practical

0.91

Correlation Coefficient

First Trust  Alexis Practical

Almost no diversification

The 3 months correlation between First and Alexis is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Alexis Practical Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexis Practical Tactical 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 Dorsey are associated (or correlated) with Alexis Practical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexis Practical Tactical has no effect on the direction of First Trust i.e., First Trust and Alexis Practical go up and down completely randomly.

Pair Corralation between First Trust and Alexis Practical

Given the investment horizon of 90 days First Trust Dorsey is expected to under-perform the Alexis Practical. In addition to that, First Trust is 1.53 times more volatile than Alexis Practical Tactical. It trades about -0.07 of its total potential returns per unit of risk. Alexis Practical Tactical is currently generating about -0.09 per unit of volatility. If you would invest  3,074  in Alexis Practical Tactical on December 25, 2024 and sell it today you would lose (133.00) from holding Alexis Practical Tactical or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

First Trust Dorsey  vs.  Alexis Practical Tactical

First Trust Dorsey

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Dorsey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, First Trust is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Alexis Practical Tactical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alexis Practical Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Alexis Practical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Alexis Practical

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

The idea behind First Trust Dorsey and Alexis Practical Tactical 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.