Correlation Between First Trust and Core Alternative

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

Diversification Opportunities for First Trust and Core Alternative

-0.69

Correlation Coefficient

First Trust  Core Alternative

Excellent diversification

The 3 months correlation between First and Core is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and Core Alternative ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Alternative ETF 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 Core Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Alternative ETF has no effect on the direction of First Trust i.e., First Trust and Core Alternative go up and down completely randomly.

Pair Corralation between First Trust and Core Alternative

Given the investment horizon of 90 days First Trust LongShort is expected to generate 1.22 times more return on investment than Core Alternative. However, First Trust is 1.22 times more volatile than Core Alternative ETF. It trades about 0.14 of its potential returns per unit of risk. Core Alternative ETF is currently generating about -0.04 per unit of risk. If you would invest  6,694  in First Trust LongShort on October 27, 2024 and sell it today you would earn a total of  113.00  from holding First Trust LongShort or generate 1.69% return on investment over 90 days.

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

First Trust LongShort  vs.  Core Alternative ETF

First Trust LongShort

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 11 (%) 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.

Core Alternative ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Alternative ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Core Alternative is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Core Alternative

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

The idea behind First Trust LongShort and Core Alternative ETF 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..