Correlation Between Focus Financial and First Trust

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

By analyzing existing cross correlation between Focus Financial Partners and First Trust Dynamic, you can compare the effects of market volatilities on Focus Financial and First Trust 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 Focus Financial with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Financial and First Trust.

Diversification Opportunities for Focus Financial and First Trust

0.0

Correlation Coefficient

Focus Financial  First Trust

Pay attention - limited upside

The 3 months correlation between Focus and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Focus Financial Partners and First Trust Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dynamic and Focus Financial 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 Focus Financial Partners are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dynamic has no effect on the direction of Focus Financial i.e., Focus Financial and First Trust go up and down completely randomly.

Pair Corralation between Focus Financial and First Trust

If you would invest (100.00) in First Trust Dynamic on December 28, 2024 and sell it today you would earn a total of  100.00  from holding First Trust Dynamic or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Focus Financial Partners  vs.  First Trust Dynamic

Focus Financial Partners

Risk-Adjusted Performance

Very Weak

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

First Trust Dynamic

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Dynamic has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable technical and fundamental indicators, First Trust 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 Focus Financial and First Trust

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

The idea behind Focus Financial Partners and First Trust Dynamic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.