Correlation Between Mai Managed and First Tr

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

By analyzing existing cross correlation between Mai Managed Volatility and First Tr Enhanced, you can compare the effects of market volatilities on Mai Managed and First Tr 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 Mai Managed with a short position of First Tr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mai Managed and First Tr.

Diversification Opportunities for Mai Managed and First Tr

0.91

Correlation Coefficient

Mai Managed  First Tr

Almost no diversification

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

Pair Corralation between Mai Managed and First Tr

Assuming the 90 days horizon Mai Managed is expected to generate 1.35 times less return on investment than First Tr. But when comparing it to its historical volatility, Mai Managed Volatility is 2.86 times less risky than First Tr. It trades about 0.14 of its potential returns per unit of risk. First Tr Enhanced is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,103  in First Tr Enhanced on September 28, 2024 and sell it today you would earn a total of  57.00  from holding First Tr Enhanced or generate 2.71% return on investment over 90 days.

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

Mai Managed Volatility  vs.  First Tr Enhanced

Mai Managed Volatility

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mai Managed Volatility are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mai Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Tr Enhanced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Tr Enhanced are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Tr is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mai Managed and First Tr

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

The idea behind Mai Managed Volatility and First Tr Enhanced 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.