Correlation Between Alexis Practical and FT Cboe

Can any of the company-specific risk be diversified away by investing in both Alexis Practical and FT Cboe 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 Alexis Practical and FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alexis Practical Tactical and FT Cboe Vest, you can compare the effects of market volatilities on Alexis Practical and FT Cboe 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 Alexis Practical with a short position of FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alexis Practical and FT Cboe.

Diversification Opportunities for Alexis Practical and FT Cboe

0.99

Correlation Coefficient

Alexis Practical  FT Cboe

No risk reduction

The 3 months correlation between Alexis and DNOV is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Alexis Practical Tactical and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and Alexis Practical 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 Alexis Practical Tactical are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Alexis Practical i.e., Alexis Practical and FT Cboe go up and down completely randomly.

Pair Corralation between Alexis Practical and FT Cboe

Given the investment horizon of 90 days Alexis Practical Tactical is expected to under-perform the FT Cboe. In addition to that, Alexis Practical is 1.55 times more volatile than FT Cboe Vest. It trades about -0.07 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about -0.08 per unit of volatility. If you would invest  4,346  in FT Cboe Vest on December 26, 2024 and sell it today you would lose (113.61) from holding FT Cboe Vest or give up 2.61% of portfolio value over 90 days.

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

Alexis Practical Tactical  vs.  FT Cboe Vest

Alexis Practical Tactical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alexis Practical Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Alexis Practical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alexis Practical and FT Cboe

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

The idea behind Alexis Practical Tactical and FT Cboe Vest 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.