Correlation Between First Trust and Blackrock Short

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Can any of the company-specific risk be diversified away by investing in both First Trust and Blackrock Short 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 Blackrock Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Preferred and Blackrock Short Term Inflat Protected, you can compare the effects of market volatilities on First Trust and Blackrock Short 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 Blackrock Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Blackrock Short.

Diversification Opportunities for First Trust and Blackrock Short

FirstBlackrockDiversified AwayFirstBlackrockDiversified Away100%
0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between First and Blackrock is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and Blackrock Short Term Inflat Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Short Term 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 Preferred are associated (or correlated) with Blackrock Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Short Term has no effect on the direction of First Trust i.e., First Trust and Blackrock Short go up and down completely randomly.

Pair Corralation between First Trust and Blackrock Short

Assuming the 90 days horizon First Trust Preferred is expected to generate 1.18 times more return on investment than Blackrock Short. However, First Trust is 1.18 times more volatile than Blackrock Short Term Inflat Protected. It trades about 0.07 of its potential returns per unit of risk. Blackrock Short Term Inflat Protected is currently generating about -0.01 per unit of risk. If you would invest  1,990  in First Trust Preferred on September 16, 2024 and sell it today you would earn a total of  14.00  from holding First Trust Preferred or generate 0.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

First Trust Preferred  vs.  Blackrock Short Term Inflat Pr

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 0.00.51.01.5
JavaScript chart by amCharts 3.21.15FPEIX BIIPX
       Timeline  
First Trust Preferred 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2020.0520.120.15
Blackrock Short Term 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Blackrock Short Term Inflat Protected has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec9.69.619.629.639.649.659.669.679.689.69

First Trust and Blackrock Short Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.38-0.18-0.0781-0.0390.00.03960.08130.210.410.61 510152025
JavaScript chart by amCharts 3.21.15FPEIX BIIPX
       Returns  

Pair Trading with First Trust and Blackrock Short

The main advantage of trading using opposite First Trust and Blackrock Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Blackrock Short 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 Blackrock Short will offset losses from the drop in Blackrock Short's long position.
The idea behind First Trust Preferred and Blackrock Short Term Inflat Protected 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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