Correlation Between First Trust and Evolve Cloud

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

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

Diversification Opportunities for First Trust and Evolve Cloud

0.66

Correlation Coefficient

First Trust  Evolve Cloud

Poor diversification

The 3 months correlation between First and Evolve is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and Evolve Cloud Computing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Cloud Computing 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 AlphaDEX are associated (or correlated) with Evolve Cloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Cloud Computing has no effect on the direction of First Trust i.e., First Trust and Evolve Cloud go up and down completely randomly.

Pair Corralation between First Trust and Evolve Cloud

Assuming the 90 days trading horizon First Trust is expected to generate 3.9 times less return on investment than Evolve Cloud. But when comparing it to its historical volatility, First Trust AlphaDEX is 1.66 times less risky than Evolve Cloud. It trades about 0.05 of its potential returns per unit of risk. Evolve Cloud Computing is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,853  in Evolve Cloud Computing on September 12, 2024 and sell it today you would earn a total of  1,009  from holding Evolve Cloud Computing or generate 54.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.7%
Values	Daily Returns

First Trust AlphaDEX  vs.  Evolve Cloud Computing

First Trust AlphaDEX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust AlphaDEX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Evolve Cloud Computing

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Cloud Computing are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Evolve Cloud displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Evolve Cloud

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

The idea behind First Trust AlphaDEX and Evolve Cloud Computing 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.