Correlation Between First Trust and Fidelity Sustainable

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

Diversification Opportunities for First Trust and Fidelity Sustainable

0.95

Correlation Coefficient

First Trust  Fidelity Sustainable

Almost no diversification

The 3 months correlation between First and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Fidelity Sustainable Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Sustainable 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 Fidelity Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Sustainable Core has no effect on the direction of First Trust i.e., First Trust and Fidelity Sustainable go up and down completely randomly.

Pair Corralation between First Trust and Fidelity Sustainable

Given the investment horizon of 90 days First Trust TCW is expected to generate 1.12 times more return on investment than Fidelity Sustainable. However, First Trust is 1.12 times more volatile than Fidelity Sustainable Core. It trades about 0.13 of its potential returns per unit of risk. Fidelity Sustainable Core is currently generating about 0.09 per unit of risk. If you would invest  4,256  in First Trust TCW on December 29, 2024 and sell it today you would earn a total of  119.00  from holding First Trust TCW or generate 2.8% 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.  Fidelity Sustainable Core

First Trust TCW

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 10 (%) 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.

Fidelity Sustainable Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable Core are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Fidelity Sustainable is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Fidelity Sustainable

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

The idea behind First Trust TCW and Fidelity Sustainable 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.