Correlation Between First Trust and Saba Closed

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

By analyzing existing cross correlation between First Trust Income and Saba Closed End Funds, you can compare the effects of market volatilities on First Trust and Saba Closed 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 Saba Closed. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Saba Closed.

Diversification Opportunities for First Trust and Saba Closed

0.94

Correlation Coefficient

First Trust  Saba Closed

Almost no diversification

The 3 months correlation between First and Saba is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and Saba Closed End Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saba Closed End 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 Income are associated (or correlated) with Saba Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saba Closed End has no effect on the direction of First Trust i.e., First Trust and Saba Closed go up and down completely randomly.

Pair Corralation between First Trust and Saba Closed

Given the investment horizon of 90 days First Trust is expected to generate 1.34 times less return on investment than Saba Closed. But when comparing it to its historical volatility, First Trust Income is 1.32 times less risky than Saba Closed. It trades about 0.11 of its potential returns per unit of risk. Saba Closed End Funds is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,088  in Saba Closed End Funds on December 20, 2024 and sell it today you would earn a total of  94.00  from holding Saba Closed End Funds or generate 4.5% return on investment over 90 days.

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

First Trust Income  vs.  Saba Closed End Funds

First Trust Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Saba Closed End

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saba Closed End Funds are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Saba Closed is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and Saba Closed

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

The idea behind First Trust Income and Saba Closed End Funds 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.