Correlation Between FT AlphaDEX and Brompton European

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

By analyzing existing cross correlation between FT AlphaDEX Industrials and Brompton European Dividend, you can compare the effects of market volatilities on FT AlphaDEX and Brompton European 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 FT AlphaDEX with a short position of Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and Brompton European.

Diversification Opportunities for FT AlphaDEX and Brompton European

0.22

Correlation Coefficient

FT AlphaDEX  Brompton European

Modest diversification

The 3 months correlation between FHG and Brompton is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and FT AlphaDEX 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 FT AlphaDEX Industrials are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and Brompton European go up and down completely randomly.

Pair Corralation between FT AlphaDEX and Brompton European

Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 0.86 times more return on investment than Brompton European. However, FT AlphaDEX Industrials is 1.17 times less risky than Brompton European. It trades about 0.27 of its potential returns per unit of risk. Brompton European Dividend is currently generating about 0.02 per unit of risk. If you would invest  5,103  in FT AlphaDEX Industrials on September 4, 2024 and sell it today you would earn a total of  1,028  from holding FT AlphaDEX Industrials or generate 20.15% return on investment over 90 days.

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

FT AlphaDEX Industrials  vs.  Brompton European Dividend

FT AlphaDEX Industrials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FT AlphaDEX Industrials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, FT AlphaDEX displayed solid returns over the last few months and may actually be approaching a breakup point.

Brompton European

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT AlphaDEX and Brompton European

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

The idea behind FT AlphaDEX Industrials and Brompton European Dividend 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.