Correlation Between First Trust and Managed Portfolio

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

By analyzing existing cross correlation between First Trust Exchange Traded and Managed Portfolio Series, you can compare the effects of market volatilities on First Trust and Managed Portfolio 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 Managed Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Managed Portfolio.

Diversification Opportunities for First Trust and Managed Portfolio

0.88

Correlation Coefficient

First Trust  Managed Portfolio

Very poor diversification

The 3 months correlation between First and Managed is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Managed Portfolio Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Portfolio Series 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 Exchange Traded are associated (or correlated) with Managed Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Portfolio Series has no effect on the direction of First Trust i.e., First Trust and Managed Portfolio go up and down completely randomly.

Pair Corralation between First Trust and Managed Portfolio

Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the Managed Portfolio. In addition to that, First Trust is 1.07 times more volatile than Managed Portfolio Series. It trades about -0.05 of its total potential returns per unit of risk. Managed Portfolio Series is currently generating about 0.01 per unit of volatility. If you would invest  3,442  in Managed Portfolio Series on December 28, 2024 and sell it today you would earn a total of  4.00  from holding Managed Portfolio Series or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

First Trust Exchange Traded  vs.  Managed Portfolio Series

First Trust Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Managed Portfolio Series

Risk-Adjusted Performance

Very Weak

Over the last 90 days Managed Portfolio Series has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Managed Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Managed Portfolio

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

The idea behind First Trust Exchange Traded and Managed Portfolio Series 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.