Correlation Between First Trust and Rivernorth Opportunistic

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

Diversification Opportunities for First Trust and Rivernorth Opportunistic

0.26

Correlation Coefficient

First Trust  Rivernorth Opportunistic

Modest diversification

The 3 months correlation between First and Rivernorth is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Rivernorth Opportunistic Munic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivernorth Opportunistic 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 Rivernorth Opportunistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivernorth Opportunistic has no effect on the direction of First Trust i.e., First Trust and Rivernorth Opportunistic go up and down completely randomly.

Pair Corralation between First Trust and Rivernorth Opportunistic

Considering the 90-day investment horizon First Trust Enhanced is expected to generate 2.4 times more return on investment than Rivernorth Opportunistic. However, First Trust is 2.4 times more volatile than Rivernorth Opportunistic Municipalome. It trades about -0.1 of its potential returns per unit of risk. Rivernorth Opportunistic Municipalome is currently generating about -0.32 per unit of risk. If you would invest  1,994  in First Trust Enhanced on December 29, 2024 and sell it today you would lose (57.00) from holding First Trust Enhanced or give up 2.86% of portfolio value over 90 days.

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

First Trust Enhanced  vs.  Rivernorth Opportunistic Munic

First Trust Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Rivernorth Opportunistic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rivernorth Opportunistic Municipalome are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong primary indicators, Rivernorth Opportunistic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Rivernorth Opportunistic

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

The idea behind First Trust Enhanced and Rivernorth Opportunistic Municipalome 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.