Correlation Between First Trust and Salient Mlp

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

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

Diversification Opportunities for First Trust and Salient Mlp

0.72

Correlation Coefficient

First Trust  Salient Mlp

Poor diversification

The 3 months correlation between First and Salient is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Salient Mlp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Mlp Energy 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 Specialty are associated (or correlated) with Salient Mlp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Mlp Energy has no effect on the direction of First Trust i.e., First Trust and Salient Mlp go up and down completely randomly.

Pair Corralation between First Trust and Salient Mlp

Considering the 90-day investment horizon First Trust is expected to generate 1.8 times less return on investment than Salient Mlp. But when comparing it to its historical volatility, First Trust Specialty is 1.11 times less risky than Salient Mlp. It trades about 0.12 of its potential returns per unit of risk. Salient Mlp Energy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  976.00  in Salient Mlp Energy on October 21, 2024 and sell it today you would earn a total of  145.00  from holding Salient Mlp Energy or generate 14.86% return on investment over 90 days.

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

First Trust Specialty  vs.  Salient Mlp Energy

First Trust Specialty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Specialty are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Salient Mlp Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salient Mlp Energy are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Salient Mlp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Salient Mlp

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

The idea behind First Trust Specialty and Salient Mlp Energy 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 CEOs Directory module to screen CEOs from public companies around the world.