Correlation Between First Trust and Global Blockchain

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

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

Diversification Opportunities for First Trust and Global Blockchain

0.56

Correlation Coefficient

First Trust  Global Blockchain

Very weak diversification

The 3 months correlation between First and Global is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Lunt and Global Blockchain Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Blockchain 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 Lunt are associated (or correlated) with Global Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Blockchain has no effect on the direction of First Trust i.e., First Trust and Global Blockchain go up and down completely randomly.

Pair Corralation between First Trust and Global Blockchain

Given the investment horizon of 90 days First Trust Lunt is expected to generate 1.75 times more return on investment than Global Blockchain. However, First Trust is 1.75 times more volatile than Global Blockchain Acquisition. It trades about 0.04 of its potential returns per unit of risk. Global Blockchain Acquisition is currently generating about 0.03 per unit of risk. If you would invest  2,744  in First Trust Lunt on September 20, 2024 and sell it today you would earn a total of  522.00  from holding First Trust Lunt or generate 19.02% return on investment over 90 days.

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

First Trust Lunt  vs.  Global Blockchain Acquisition

First Trust Lunt

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Lunt are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Global Blockchain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Blockchain Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Global Blockchain is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and Global Blockchain

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

The idea behind First Trust Lunt and Global Blockchain Acquisition 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.