Correlation Between Capitol Series and First Trust

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

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

Diversification Opportunities for Capitol Series and First Trust

0.88

Correlation Coefficient

Capitol Series  First Trust

Very poor diversification

The 3 months correlation between Capitol and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Series Trust and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort and Capitol Series 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 Capitol Series Trust 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 LongShort has no effect on the direction of Capitol Series i.e., Capitol Series and First Trust go up and down completely randomly.

Pair Corralation between Capitol Series and First Trust

Given the investment horizon of 90 days Capitol Series Trust is expected to under-perform the First Trust. In addition to that, Capitol Series is 1.53 times more volatile than First Trust LongShort. It trades about -0.06 of its total potential returns per unit of risk. First Trust LongShort is currently generating about -0.08 per unit of volatility. If you would invest  6,658  in First Trust LongShort on December 27, 2024 and sell it today you would lose (229.00) from holding First Trust LongShort or give up 3.44% of portfolio value over 90 days.

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

Capitol Series Trust  vs.  First Trust LongShort

Capitol Series Trust

Risk-Adjusted Performance

Very Weak

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

First Trust LongShort

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Capitol Series and First Trust

The main advantage of trading using opposite Capitol Series and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Series 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 Capitol Series Trust and First Trust LongShort 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.