Correlation Between First Trust/confluence and First Trust

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

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

Diversification Opportunities for First Trust/confluence and First Trust

0.19

Correlation Coefficient

First Trust/confluence  First Trust

Average diversification

The 3 months correlation between First and First is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Trustconfluence Small and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and First Trust/confluence 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 Trustconfluence Small 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 Short has no effect on the direction of First Trust/confluence i.e., First Trust/confluence and First Trust go up and down completely randomly.

Pair Corralation between First Trust/confluence and First Trust

Assuming the 90 days horizon First Trustconfluence Small is expected to under-perform the First Trust. In addition to that, First Trust/confluence is 10.03 times more volatile than First Trust Short. It trades about -0.19 of its total potential returns per unit of risk. First Trust Short is currently generating about -0.06 per unit of volatility. If you would invest  1,804  in First Trust Short on December 4, 2024 and sell it today you would lose (2.00) from holding First Trust Short or give up 0.11% of portfolio value over 90 days.

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

First Trustconfluence Small  vs.  First Trust Short

First Trust/confluence

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trustconfluence Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

First Trust Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust 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/confluence and First Trust

The main advantage of trading using opposite First Trust/confluence and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust/confluence 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 First Trustconfluence Small and First Trust Short 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.