Correlation Between First Trust and Korea Closed

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

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

Diversification Opportunities for First Trust and Korea Closed

0.49

Correlation Coefficient

First Trust  Korea Closed

Very weak diversification

The 3 months correlation between First and Korea is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mortgage and Korea Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Closed 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 Mortgage are associated (or correlated) with Korea Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Closed has no effect on the direction of First Trust i.e., First Trust and Korea Closed go up and down completely randomly.

Pair Corralation between First Trust and Korea Closed

Considering the 90-day investment horizon First Trust Mortgage is expected to generate 0.62 times more return on investment than Korea Closed. However, First Trust Mortgage is 1.61 times less risky than Korea Closed. It trades about 0.08 of its potential returns per unit of risk. Korea Closed is currently generating about -0.02 per unit of risk. If you would invest  1,027  in First Trust Mortgage on September 14, 2024 and sell it today you would earn a total of  188.00  from holding First Trust Mortgage or generate 18.31% return on investment over 90 days.

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

First Trust Mortgage  vs.  Korea Closed

First Trust Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Korea Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite unsteady performance in the last few months, the Fund's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the mutual fund stockholders.

Pair Trading with First Trust and Korea Closed

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

The idea behind First Trust Mortgage and Korea Closed 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.