Correlation Between First Trust and Starboard Investment

Can any of the company-specific risk be diversified away by investing in both First Trust and Starboard Investment 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 Starboard Investment 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 Starboard Investment Trust, you can compare the effects of market volatilities on First Trust and Starboard Investment 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 Starboard Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Starboard Investment.

Diversification Opportunities for First Trust and Starboard Investment

0.73

Correlation Coefficient

First Trust  Starboard Investment

Poor diversification

The 3 months correlation between First and Starboard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Starboard Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starboard Investment 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 Starboard Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starboard Investment has no effect on the direction of First Trust i.e., First Trust and Starboard Investment go up and down completely randomly.

Pair Corralation between First Trust and Starboard Investment

Given the investment horizon of 90 days First Trust is expected to generate 2.97 times less return on investment than Starboard Investment. But when comparing it to its historical volatility, First Trust Exchange Traded is 6.13 times less risky than Starboard Investment. It trades about 0.31 of its potential returns per unit of risk. Starboard Investment Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,579  in Starboard Investment Trust on September 13, 2024 and sell it today you would earn a total of  111.00  from holding Starboard Investment Trust or generate 7.03% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  Starboard Investment Trust

First Trust Exchange

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. 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.

Starboard Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Starboard Investment Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Starboard Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Trust and Starboard Investment

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

The idea behind First Trust Exchange Traded and Starboard Investment Trust 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..