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 Preferred, 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

0.31

Correlation Coefficient

First Trustconfluence  First Trust

Weak diversification

The 3 months correlation between First and First is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Trustconfluence Small and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred 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 Preferred 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 generate 6.82 times more return on investment than First Trust. However, First Trustconfluence is 6.82 times more volatile than First Trust Preferred. It trades about 0.05 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.08 per unit of risk. If you would invest  3,194  in First Trustconfluence Small on September 14, 2024 and sell it today you would earn a total of  86.00  from holding First Trustconfluence Small or generate 2.69% return on investment over 90 days.

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

First Trustconfluence Small  vs.  First Trust Preferred

First Trustconfluence

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trustconfluence Small are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, First Trustconfluence is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Preferred

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Preferred are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Preferred 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.