Correlation Between First Trust and Capitol Series

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

Diversification Opportunities for First Trust and Capitol Series

0.98

Correlation Coefficient

First Trust  Capitol Series

Almost no diversification

The 3 months correlation between First and Capitol is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and Capitol Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Series Trust 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 Capitol Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Series Trust has no effect on the direction of First Trust i.e., First Trust and Capitol Series go up and down completely randomly.

Pair Corralation between First Trust and Capitol Series

Given the investment horizon of 90 days First Trust is expected to generate 1.23 times less return on investment than Capitol Series. But when comparing it to its historical volatility, First Trust LongShort is 1.2 times less risky than Capitol Series. It trades about 0.2 of its potential returns per unit of risk. Capitol Series Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,301  in Capitol Series Trust on September 17, 2024 and sell it today you would earn a total of  354.00  from holding Capitol Series Trust or generate 8.23% return on investment over 90 days.

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

First Trust LongShort  vs.  Capitol Series Trust

First Trust LongShort

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capitol Series Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Series Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capitol Series may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Trust and Capitol Series

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

The idea behind First Trust LongShort and Capitol Series Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.