Correlation Between Blackrock Enhanced and First Trust

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

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

Diversification Opportunities for Blackrock Enhanced and First Trust

0.03

Correlation Coefficient

Blackrock Enhanced  First Trust

Significant diversification

The 3 months correlation between Blackrock and First is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Government and First Trust Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mortgage and Blackrock Enhanced 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 Blackrock Enhanced Government 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 Mortgage has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and First Trust go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and First Trust

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 1.04 times less return on investment than First Trust. In addition to that, Blackrock Enhanced is 1.19 times more volatile than First Trust Mortgage. It trades about 0.04 of its total potential returns per unit of risk. First Trust Mortgage is currently generating about 0.05 per unit of volatility. If you would invest  1,204  in First Trust Mortgage on December 4, 2024 and sell it today you would earn a total of  10.00  from holding First Trust Mortgage or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Blackrock Enhanced Government  vs.  First Trust Mortgage

Blackrock Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Enhanced Government has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, Blackrock Enhanced is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Mortgage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mortgage are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Enhanced and First Trust

The main advantage of trading using opposite Blackrock Enhanced and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Enhanced 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 Blackrock Enhanced Government and First Trust Mortgage 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.