Correlation Between First Trust and OVS SpA

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

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

Diversification Opportunities for First Trust and OVS SpA

0.91

Correlation Coefficient

First Trust  OVS SpA

Almost no diversification

The 3 months correlation between First and OVS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Horizon and OVS SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OVS SpA 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 Horizon are associated (or correlated) with OVS SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OVS SpA has no effect on the direction of First Trust i.e., First Trust and OVS SpA go up and down completely randomly.

Pair Corralation between First Trust and OVS SpA

Given the investment horizon of 90 days First Trust Horizon is expected to generate 0.67 times more return on investment than OVS SpA. However, First Trust Horizon is 1.49 times less risky than OVS SpA. It trades about -0.26 of its potential returns per unit of risk. OVS SpA is currently generating about -0.33 per unit of risk. If you would invest  3,748  in First Trust Horizon on October 8, 2024 and sell it today you would lose (164.50) from holding First Trust Horizon or give up 4.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

First Trust Horizon  vs.  OVS SpA

First Trust Horizon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Horizon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

OVS SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and OVS SpA

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

The idea behind First Trust Horizon and OVS SpA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.