Correlation Between First Trust and Trust For

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

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

Diversification Opportunities for First Trust and Trust For

0.99

Correlation Coefficient

First Trust  Trust For

No risk reduction

The 3 months correlation between First and Trust is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Trust For Professional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trust For Professional 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 TCW are associated (or correlated) with Trust For. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trust For Professional has no effect on the direction of First Trust i.e., First Trust and Trust For go up and down completely randomly.

Pair Corralation between First Trust and Trust For

Given the investment horizon of 90 days First Trust TCW is expected to generate 1.3 times more return on investment than Trust For. However, First Trust is 1.3 times more volatile than Trust For Professional. It trades about 0.12 of its potential returns per unit of risk. Trust For Professional is currently generating about 0.09 per unit of risk. If you would invest  4,271  in First Trust TCW on December 28, 2024 and sell it today you would earn a total of  105.00  from holding First Trust TCW or generate 2.46% return on investment over 90 days.

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

First Trust TCW  vs.  Trust For Professional

First Trust TCW

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Trust For Professional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trust For Professional are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Trust For is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Trust For

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

The idea behind First Trust TCW and Trust For Professional 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..