Correlation Between First Trust and Siren DIVCON

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

Diversification Opportunities for First Trust and Siren DIVCON

0.09

Correlation Coefficient

First Trust  Siren DIVCON

Significant diversification

The 3 months correlation between First and Siren is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and Siren DIVCON Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siren DIVCON Dividend 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 Siren DIVCON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siren DIVCON Dividend has no effect on the direction of First Trust i.e., First Trust and Siren DIVCON go up and down completely randomly.

Pair Corralation between First Trust and Siren DIVCON

Given the investment horizon of 90 days First Trust LongShort is expected to generate 0.36 times more return on investment than Siren DIVCON. However, First Trust LongShort is 2.8 times less risky than Siren DIVCON. It trades about -0.08 of its potential returns per unit of risk. Siren DIVCON Dividend is currently generating about -0.09 per unit of risk. If you would invest  6,679  in First Trust LongShort on October 5, 2024 and sell it today you would lose (98.00) from holding First Trust LongShort or give up 1.47% of portfolio value over 90 days.

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

First Trust LongShort  vs.  Siren DIVCON Dividend

First Trust LongShort

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 8 (%) 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.

Siren DIVCON Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siren DIVCON Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Siren DIVCON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Siren DIVCON

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

The idea behind First Trust LongShort and Siren DIVCON Dividend 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .