Correlation Between First Trust and First Internet

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

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

Diversification Opportunities for First Trust and First Internet

0.84

Correlation Coefficient

First Trust  First Internet

Very poor diversification

The 3 months correlation between First and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and First Internet Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Internet Bancorp 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 Enhanced are associated (or correlated) with First Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Internet Bancorp has no effect on the direction of First Trust i.e., First Trust and First Internet go up and down completely randomly.

Pair Corralation between First Trust and First Internet

Considering the 90-day investment horizon First Trust Enhanced is expected to generate 0.96 times more return on investment than First Internet. However, First Trust Enhanced is 1.04 times less risky than First Internet. It trades about 0.33 of its potential returns per unit of risk. First Internet Bancorp is currently generating about 0.07 per unit of risk. If you would invest  2,040  in First Trust Enhanced on September 16, 2024 and sell it today you would earn a total of  60.00  from holding First Trust Enhanced or generate 2.94% return on investment over 90 days.

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

First Trust Enhanced  vs.  First Internet Bancorp

First Trust Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Internet Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Internet Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, First Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and First Internet

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

The idea behind First Trust Enhanced and First Internet Bancorp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.