Correlation Between Renaissance IPO and First Trust

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

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

Diversification Opportunities for Renaissance IPO and First Trust

0.31

Correlation Coefficient

Renaissance IPO  First Trust

Weak diversification

The 3 months correlation between Renaissance and First is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Renaissance IPO ETF and First Trust NYSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NYSE and Renaissance IPO 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 Renaissance IPO ETF 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 NYSE has no effect on the direction of Renaissance IPO i.e., Renaissance IPO and First Trust go up and down completely randomly.

Pair Corralation between Renaissance IPO and First Trust

Considering the 90-day investment horizon Renaissance IPO ETF is expected to under-perform the First Trust. In addition to that, Renaissance IPO is 1.66 times more volatile than First Trust NYSE. It trades about -0.07 of its total potential returns per unit of risk. First Trust NYSE is currently generating about 0.03 per unit of volatility. If you would invest  17,298  in First Trust NYSE on December 2, 2024 and sell it today you would earn a total of  249.00  from holding First Trust NYSE or generate 1.44% return on investment over 90 days.

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

Renaissance IPO ETF  vs.  First Trust NYSE

Renaissance IPO ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renaissance IPO ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

First Trust NYSE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NYSE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, First Trust is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Renaissance IPO and First Trust

The main advantage of trading using opposite Renaissance IPO and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renaissance IPO 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 Renaissance IPO ETF and First Trust NYSE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.