Correlation Between First Trust and NYLI MacKay

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

Diversification Opportunities for First Trust and NYLI MacKay

0.91

Correlation Coefficient

First Trust  NYLI MacKay

Almost no diversification

The 3 months correlation between First and NYLI is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and NYLI MacKay Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYLI MacKay Core 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 NYLI MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYLI MacKay Core has no effect on the direction of First Trust i.e., First Trust and NYLI MacKay go up and down completely randomly.

Pair Corralation between First Trust and NYLI MacKay

Given the investment horizon of 90 days First Trust TCW is expected to under-perform the NYLI MacKay. In addition to that, First Trust is 1.35 times more volatile than NYLI MacKay Core. It trades about -0.07 of its total potential returns per unit of risk. NYLI MacKay Core is currently generating about 0.02 per unit of volatility. If you would invest  2,092  in NYLI MacKay Core on October 25, 2024 and sell it today you would earn a total of  6.00  from holding NYLI MacKay Core or generate 0.29% 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.  NYLI MacKay Core

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

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

NYLI MacKay Core

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NYLI MacKay Core are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NYLI MacKay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and NYLI MacKay

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

The idea behind First Trust TCW and NYLI MacKay Core 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.