Correlation Between DSJA and First Trust

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

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

Diversification Opportunities for DSJA and First Trust

0.87

Correlation Coefficient

DSJA  First Trust

Very poor diversification

The 3 months correlation between DSJA and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri and DSJA 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 DSJA 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 Industri has no effect on the direction of DSJA i.e., DSJA and First Trust go up and down completely randomly.

Pair Corralation between DSJA and First Trust

If you would invest  7,351  in First Trust IndustrialsProducer on August 30, 2024 and sell it today you would earn a total of  925.00  from holding First Trust IndustrialsProducer or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

DSJA  vs.  First Trust IndustrialsProduce

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, DSJA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Trust Industri

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust IndustrialsProducer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with DSJA and First Trust

The main advantage of trading using opposite DSJA and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DSJA 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 DSJA and First Trust IndustrialsProducer 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..