Correlation Between First Trust and Siren Nasdaq

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

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

Diversification Opportunities for First Trust and Siren Nasdaq

-0.58

Correlation Coefficient

First Trust  Siren Nasdaq

Excellent diversification

The 3 months correlation between First and Siren is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Siren Nasdaq NexGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siren Nasdaq NexGen 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 Indxx are associated (or correlated) with Siren Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siren Nasdaq NexGen has no effect on the direction of First Trust i.e., First Trust and Siren Nasdaq go up and down completely randomly.

Pair Corralation between First Trust and Siren Nasdaq

Given the investment horizon of 90 days First Trust Indxx is expected to generate 0.35 times more return on investment than Siren Nasdaq. However, First Trust Indxx is 2.83 times less risky than Siren Nasdaq. It trades about 0.13 of its potential returns per unit of risk. Siren Nasdaq NexGen is currently generating about -0.16 per unit of risk. If you would invest  4,658  in First Trust Indxx on December 28, 2024 and sell it today you would earn a total of  310.00  from holding First Trust Indxx or generate 6.66% return on investment over 90 days.

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

First Trust Indxx  vs.  Siren Nasdaq NexGen

First Trust Indxx

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Siren Nasdaq NexGen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Siren Nasdaq NexGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's fundamental 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.

Pair Trading with First Trust and Siren Nasdaq

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

The idea behind First Trust Indxx and Siren Nasdaq NexGen 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.