Correlation Between First Trust and Mackenzie Conservative

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

By analyzing existing cross correlation between First Trust Global and Mackenzie Conservative Allocation, you can compare the effects of market volatilities on First Trust and Mackenzie Conservative 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 Mackenzie Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Mackenzie Conservative.

Diversification Opportunities for First Trust and Mackenzie Conservative

0.68

Correlation Coefficient

First Trust  Mackenzie Conservative

Poor diversification

The 3 months correlation between First and Mackenzie is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Global and Mackenzie Conservative Allocat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Conservative 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 Global are associated (or correlated) with Mackenzie Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Conservative has no effect on the direction of First Trust i.e., First Trust and Mackenzie Conservative go up and down completely randomly.

Pair Corralation between First Trust and Mackenzie Conservative

Assuming the 90 days trading horizon First Trust Global is expected to generate 0.51 times more return on investment than Mackenzie Conservative. However, First Trust Global is 1.96 times less risky than Mackenzie Conservative. It trades about 0.08 of its potential returns per unit of risk. Mackenzie Conservative Allocation is currently generating about 0.01 per unit of risk. If you would invest  1,738  in First Trust Global on December 30, 2024 and sell it today you would earn a total of  29.00  from holding First Trust Global or generate 1.67% return on investment over 90 days.

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

First Trust Global  vs.  Mackenzie Conservative Allocat

First Trust Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mackenzie Conservative

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mackenzie Conservative Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mackenzie Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Mackenzie Conservative

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

The idea behind First Trust Global and Mackenzie Conservative Allocation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.