Correlation Between First Trust and Janus Detroit

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

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

Diversification Opportunities for First Trust and Janus Detroit

0.46

Correlation Coefficient

First Trust  Janus Detroit

Very weak diversification

The 3 months correlation between First and Janus is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Janus Detroit Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Detroit Street 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 Senior are associated (or correlated) with Janus Detroit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Detroit Street has no effect on the direction of First Trust i.e., First Trust and Janus Detroit go up and down completely randomly.

Pair Corralation between First Trust and Janus Detroit

Given the investment horizon of 90 days First Trust is expected to generate 1.02 times less return on investment than Janus Detroit. But when comparing it to its historical volatility, First Trust Senior is 2.82 times less risky than Janus Detroit. It trades about 0.14 of its potential returns per unit of risk. Janus Detroit Street is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,861  in Janus Detroit Street on December 28, 2024 and sell it today you would earn a total of  29.00  from holding Janus Detroit Street or generate 0.6% return on investment over 90 days.

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

First Trust Senior  vs.  Janus Detroit Street

First Trust Senior

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Janus Detroit Street

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Detroit Street are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Janus Detroit 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 Janus Detroit

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

The idea behind First Trust Senior and Janus Detroit Street 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.