Correlation Between First Trust and Calvert Global

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

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

Diversification Opportunities for First Trust and Calvert Global

0.37

Correlation Coefficient

First Trust  Calvert Global

Weak diversification

The 3 months correlation between First and Calvert is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Water and Calvert Global Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Global Energy 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 Water are associated (or correlated) with Calvert Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Global Energy has no effect on the direction of First Trust i.e., First Trust and Calvert Global go up and down completely randomly.

Pair Corralation between First Trust and Calvert Global

Considering the 90-day investment horizon First Trust Water is expected to generate 0.99 times more return on investment than Calvert Global. However, First Trust Water is 1.01 times less risky than Calvert Global. It trades about 0.05 of its potential returns per unit of risk. Calvert Global Energy is currently generating about -0.01 per unit of risk. If you would invest  9,766  in First Trust Water on September 27, 2024 and sell it today you would earn a total of  606.50  from holding First Trust Water or generate 6.21% return on investment over 90 days.

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

First Trust Water  vs.  Calvert Global Energy

First Trust Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Calvert Global Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Global Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with First Trust and Calvert Global

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

The idea behind First Trust Water and Calvert Global Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.