Correlation Between First Trust and Blackrock Enhanced

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

By analyzing existing cross correlation between First Trust Intermediate and Blackrock Enhanced Capital, you can compare the effects of market volatilities on First Trust and Blackrock Enhanced 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 Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Blackrock Enhanced.

Diversification Opportunities for First Trust and Blackrock Enhanced

0.36

Correlation Coefficient

First Trust  Blackrock Enhanced

Weak diversification

The 3 months correlation between First and Blackrock is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intermediate and Blackrock Enhanced Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Enhanced 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 Intermediate are associated (or correlated) with Blackrock Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Enhanced has no effect on the direction of First Trust i.e., First Trust and Blackrock Enhanced go up and down completely randomly.

Pair Corralation between First Trust and Blackrock Enhanced

Considering the 90-day investment horizon First Trust is expected to generate 2.81 times less return on investment than Blackrock Enhanced. But when comparing it to its historical volatility, First Trust Intermediate is 1.13 times less risky than Blackrock Enhanced. It trades about 0.06 of its potential returns per unit of risk. Blackrock Enhanced Capital is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,904  in Blackrock Enhanced Capital on August 31, 2024 and sell it today you would earn a total of  108.00  from holding Blackrock Enhanced Capital or generate 5.67% return on investment over 90 days.

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

First Trust Intermediate  vs.  Blackrock Enhanced Capital

First Trust Intermediate

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Intermediate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Blackrock Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Capital are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong forward indicators, Blackrock Enhanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Blackrock Enhanced

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

The idea behind First Trust Intermediate and Blackrock Enhanced Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.