Correlation Between First Trust and Guardian International

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

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

Diversification Opportunities for First Trust and Guardian International

0.03

Correlation Coefficient

First Trust  Guardian International

Significant diversification

The 3 months correlation between First and Guardian is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Guardian International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian International 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 Indxx are associated (or correlated) with Guardian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian International has no effect on the direction of First Trust i.e., First Trust and Guardian International go up and down completely randomly.

Pair Corralation between First Trust and Guardian International

Assuming the 90 days trading horizon First Trust Indxx is expected to generate 0.99 times more return on investment than Guardian International. However, First Trust Indxx is 1.01 times less risky than Guardian International. It trades about 0.11 of its potential returns per unit of risk. Guardian International Equity is currently generating about 0.03 per unit of risk. If you would invest  1,018  in First Trust Indxx on October 25, 2024 and sell it today you would earn a total of  165.00  from holding First Trust Indxx or generate 16.21% return on investment over 90 days.

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

First Trust Indxx  vs.  Guardian International Equity

First Trust Indxx

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guardian International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guardian International Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guardian International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Guardian International

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

The idea behind First Trust Indxx and Guardian International Equity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.