Correlation Between First Trust and SGI Dynamic

Can any of the company-specific risk be diversified away by investing in both First Trust and SGI Dynamic 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 SGI Dynamic 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 SGI Dynamic Tactical, you can compare the effects of market volatilities on First Trust and SGI Dynamic 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 SGI Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SGI Dynamic.

Diversification Opportunities for First Trust and SGI Dynamic

0.92

Correlation Coefficient

First Trust  SGI Dynamic

Almost no diversification

The 3 months correlation between First and SGI is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and SGI Dynamic Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Dynamic Tactical 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 SGI Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Dynamic Tactical has no effect on the direction of First Trust i.e., First Trust and SGI Dynamic go up and down completely randomly.

Pair Corralation between First Trust and SGI Dynamic

Given the investment horizon of 90 days First Trust is expected to generate 1.23 times less return on investment than SGI Dynamic. But when comparing it to its historical volatility, First Trust Income is 1.58 times less risky than SGI Dynamic. It trades about 0.08 of its potential returns per unit of risk. SGI Dynamic Tactical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,155  in SGI Dynamic Tactical on September 14, 2024 and sell it today you would earn a total of  26.00  from holding SGI Dynamic Tactical or generate 0.82% 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.  SGI Dynamic Tactical

First Trust Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Income are ranked lower than 6 (%) 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.

SGI Dynamic Tactical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SGI Dynamic Tactical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SGI Dynamic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and SGI Dynamic

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

The idea behind First Trust Income and SGI Dynamic Tactical 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.