Correlation Between First Trust and Accelerate Absolute

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

Diversification Opportunities for First Trust and Accelerate Absolute

0.55

Correlation Coefficient

First Trust  Accelerate Absolute

Very weak diversification

The 3 months correlation between First and Accelerate is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and Accelerate Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accelerate Absolute 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 Accelerate Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accelerate Absolute has no effect on the direction of First Trust i.e., First Trust and Accelerate Absolute go up and down completely randomly.

Pair Corralation between First Trust and Accelerate Absolute

Assuming the 90 days trading horizon First Trust is expected to generate 2.63 times less return on investment than Accelerate Absolute. But when comparing it to its historical volatility, First Trust AlphaDEX is 1.43 times less risky than Accelerate Absolute. It trades about 0.02 of its potential returns per unit of risk. Accelerate Absolute Return is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,671  in Accelerate Absolute Return on September 15, 2024 and sell it today you would earn a total of  65.00  from holding Accelerate Absolute Return or generate 2.43% return on investment over 90 days.

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

First Trust AlphaDEX  vs.  Accelerate Absolute Return

First Trust AlphaDEX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust AlphaDEX are ranked lower than 1 (%) 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.

Accelerate Absolute

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Accelerate Absolute Return are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Accelerate Absolute 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 Accelerate Absolute

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

The idea behind First Trust AlphaDEX and Accelerate Absolute Return 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.