Correlation Between AdvisorShares and First Trust

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

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

Diversification Opportunities for AdvisorShares and First Trust

0.0

Correlation Coefficient

AdvisorShares  First Trust

Pay attention - limited upside

The 3 months correlation between AdvisorShares and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and AdvisorShares 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 AdvisorShares 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 Dorsey has no effect on the direction of AdvisorShares i.e., AdvisorShares and First Trust go up and down completely randomly.

Pair Corralation between AdvisorShares and First Trust

If you would invest (100.00) in AdvisorShares on December 30, 2024 and sell it today you would earn a total of  100.00  from holding AdvisorShares or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AdvisorShares  vs.  First Trust Dorsey

AdvisorShares

Risk-Adjusted Performance

Very Weak

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

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. In spite of comparatively stable essential indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AdvisorShares and First Trust

The main advantage of trading using opposite AdvisorShares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvisorShares 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 AdvisorShares and First Trust Dorsey 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.