Correlation Between First Trust and Evolve E

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

Diversification Opportunities for First Trust and Evolve E

0.13

Correlation Coefficient

First Trust  Evolve E

Average diversification

The 3 months correlation between First and Evolve is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and Evolve E Gaming Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve E Gaming 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 E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve E Gaming has no effect on the direction of First Trust i.e., First Trust and Evolve E go up and down completely randomly.

Pair Corralation between First Trust and Evolve E

Assuming the 90 days trading horizon First Trust AlphaDEX is expected to under-perform the Evolve E. But the etf apears to be less risky and, when comparing its historical volatility, First Trust AlphaDEX is 1.05 times less risky than Evolve E. The etf trades about -0.02 of its potential returns per unit of risk. The Evolve E Gaming Index is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,495  in Evolve E Gaming Index on December 2, 2024 and sell it today you would earn a total of  262.00  from holding Evolve E Gaming Index or generate 7.5% return on investment over 90 days.

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

First Trust AlphaDEX  vs.  Evolve E Gaming Index

First Trust AlphaDEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust AlphaDEX has generated negative risk-adjusted returns adding no value to investors with long positions. 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 E Gaming

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve E Gaming Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Evolve E may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Trust and Evolve E

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

The idea behind First Trust AlphaDEX and Evolve E Gaming Index 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.