Correlation Between First Trust and AdvisorShares

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

Diversification Opportunities for First Trust and AdvisorShares

0.88

Correlation Coefficient

First Trust  AdvisorShares

Very poor diversification

The 3 months correlation between First and AdvisorShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and AdvisorShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares 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 AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares has no effect on the direction of First Trust i.e., First Trust and AdvisorShares go up and down completely randomly.

Pair Corralation between First Trust and AdvisorShares

If you would invest  6,537  in First Trust LongShort on September 18, 2024 and sell it today you would earn a total of  190.00  from holding First Trust LongShort or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

First Trust LongShort  vs.  AdvisorShares

First Trust LongShort

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 18 (%) 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.

AdvisorShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AdvisorShares is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and AdvisorShares

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

The idea behind First Trust LongShort and AdvisorShares 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.