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 Equity, 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

0.89

Correlation Coefficient

Renaissance IPO  First Trust

Very poor diversification

The 3 months correlation between Renaissance and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Renaissance IPO ETF and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity 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 Equity 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. But the etf apears to be less risky and, when comparing its historical volatility, Renaissance IPO ETF is 1.09 times less risky than First Trust. The etf trades about -0.11 of its potential returns per unit of risk. The First Trust Equity is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  12,065  in First Trust Equity on December 30, 2024 and sell it today you would lose (850.00) from holding First Trust Equity or give up 7.05% of portfolio value over 90 days.

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

Renaissance IPO ETF  vs.  First Trust Equity

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 uncertain performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

First Trust Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 Equity 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.