Correlation Between Strategy Shares and First Trust

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

By analyzing existing cross correlation between Strategy Shares Gold Hedged and First Trust Lunt, you can compare the effects of market volatilities on Strategy Shares and First Trust 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 Strategy Shares with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategy Shares and First Trust.

Diversification Opportunities for Strategy Shares and First Trust

0.63

Correlation Coefficient

Strategy Shares  First Trust

Poor diversification

The 3 months correlation between Strategy and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares Gold Hedged and First Trust Lunt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Lunt and Strategy Shares 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 Strategy Shares Gold Hedged are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Lunt has no effect on the direction of Strategy Shares i.e., Strategy Shares and First Trust go up and down completely randomly.

Pair Corralation between Strategy Shares and First Trust

If you would invest  3,357  in First Trust Lunt on September 19, 2024 and sell it today you would earn a total of  8.00  from holding First Trust Lunt or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Strategy Shares Gold Hedged  vs.  First Trust Lunt

Strategy Shares Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategy Shares Gold Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Strategy Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Trust Lunt

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Lunt are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Strategy Shares and First Trust

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

The idea behind Strategy Shares Gold Hedged and First Trust Lunt 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.