Correlation Between First Trustconfluence and First Trust

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

Diversification Opportunities for First Trustconfluence and First Trust

0.58

Correlation Coefficient

First Trustconfluence  First Trust

Very weak diversification

The 3 months correlation between First and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Trustconfluence Small and First Trust Merger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Merger and First Trustconfluence 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 Merger has no effect on the direction of First Trustconfluence i.e., First Trustconfluence and First Trust go up and down completely randomly.

Pair Corralation between First Trustconfluence and First Trust

Assuming the 90 days horizon First Trustconfluence Small is expected to under-perform the First Trust. In addition to that, First Trustconfluence is 29.31 times more volatile than First Trust Merger. It trades about -0.18 of its total potential returns per unit of risk. First Trust Merger is currently generating about 0.32 per unit of volatility. If you would invest  1,047  in First Trust Merger on October 21, 2024 and sell it today you would earn a total of  3.00  from holding First Trust Merger or generate 0.29% return on investment over 90 days.

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

First Trustconfluence Small  vs.  First Trust Merger

First Trustconfluence

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

First Trust Merger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Merger has generated negative risk-adjusted returns adding no value to fund investors. 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 Trustconfluence and First Trust

The main advantage of trading using opposite First Trustconfluence and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trustconfluence 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 Merger 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.