Correlation Between First Trust and AB Core

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

Diversification Opportunities for First Trust and AB Core

0.99

Correlation Coefficient

First Trust  AB Core

No risk reduction

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

Pair Corralation between First Trust and AB Core

Given the investment horizon of 90 days First Trust TCW is expected to under-perform the AB Core. In addition to that, First Trust is 1.12 times more volatile than AB Core Plus. It trades about -0.06 of its total potential returns per unit of risk. AB Core Plus is currently generating about -0.01 per unit of volatility. If you would invest  3,582  in AB Core Plus on September 3, 2024 and sell it today you would lose (9.00) from holding AB Core Plus or give up 0.25% of portfolio value over 90 days.

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

First Trust TCW  vs.  AB Core Plus

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

AB Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AB Core Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, AB Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and AB Core

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

The idea behind First Trust TCW and AB Core Plus 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.