Correlation Between First Trust and ASPY

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

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

Diversification Opportunities for First Trust and ASPY

0.1

Correlation Coefficient

First Trust  ASPY

Average diversification

The 3 months correlation between First and ASPY is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and ASPY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPY 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 LongShort are associated (or correlated) with ASPY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPY has no effect on the direction of First Trust i.e., First Trust and ASPY go up and down completely randomly.

Pair Corralation between First Trust and ASPY

If you would invest  6,653  in First Trust LongShort on October 9, 2024 and sell it today you would earn a total of  48.00  from holding First Trust LongShort or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

First Trust LongShort  vs.  ASPY

First Trust LongShort

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ASPY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASPY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ASPY 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 and ASPY

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

The idea behind First Trust LongShort and ASPY 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.