Correlation Between First Trust and Toroso Investments

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

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

Diversification Opportunities for First Trust and Toroso Investments

0.75

Correlation Coefficient

First Trust  Toroso Investments

Poor diversification

The 3 months correlation between First and Toroso is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and Toroso Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toroso Investments 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 Value are associated (or correlated) with Toroso Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toroso Investments has no effect on the direction of First Trust i.e., First Trust and Toroso Investments go up and down completely randomly.

Pair Corralation between First Trust and Toroso Investments

If you would invest  4,371  in First Trust Value on October 22, 2024 and sell it today you would earn a total of  37.00  from holding First Trust Value or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.26%
Values	Daily Returns

First Trust Value  vs.  Toroso Investments

First Trust Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Toroso Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toroso Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Toroso Investments is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Toroso Investments

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

The idea behind First Trust Value and Toroso Investments 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.