Correlation Between First Trust and Timothy Plan

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

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

Diversification Opportunities for First Trust and Timothy Plan

0.92

Correlation Coefficient

First Trust  Timothy Plan

Almost no diversification

The 3 months correlation between First and Timothy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Timothy Plan LargeMid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan LargeMid 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 Dorsey are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan LargeMid has no effect on the direction of First Trust i.e., First Trust and Timothy Plan go up and down completely randomly.

Pair Corralation between First Trust and Timothy Plan

Allowing for the 90-day total investment horizon First Trust Dorsey is expected to under-perform the Timothy Plan. In addition to that, First Trust is 1.36 times more volatile than Timothy Plan LargeMid. It trades about -0.09 of its total potential returns per unit of risk. Timothy Plan LargeMid is currently generating about -0.02 per unit of volatility. If you would invest  4,351  in Timothy Plan LargeMid on December 26, 2024 and sell it today you would lose (60.00) from holding Timothy Plan LargeMid or give up 1.38% of portfolio value over 90 days.

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

First Trust Dorsey  vs.  Timothy Plan LargeMid

First Trust Dorsey

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Dorsey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Timothy Plan LargeMid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Plan LargeMid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Timothy Plan 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 Timothy Plan

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

The idea behind First Trust Dorsey and Timothy Plan LargeMid 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.