Correlation Between AllianzIM Equity and First Trust

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

By analyzing existing cross correlation between AllianzIM Equity Buffer15 and First Trust Cboe, you can compare the effects of market volatilities on AllianzIM Equity 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 AllianzIM Equity with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of AllianzIM Equity and First Trust.

Diversification Opportunities for AllianzIM Equity and First Trust

0.81

Correlation Coefficient

AllianzIM Equity  First Trust

Very poor diversification

The 3 months correlation between AllianzIM and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AllianzIM Equity Buffer15 and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and AllianzIM Equity 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 AllianzIM Equity Buffer15 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 Cboe has no effect on the direction of AllianzIM Equity i.e., AllianzIM Equity and First Trust go up and down completely randomly.

Pair Corralation between AllianzIM Equity and First Trust

Given the investment horizon of 90 days AllianzIM Equity Buffer15 is expected to under-perform the First Trust. In addition to that, AllianzIM Equity is 1.53 times more volatile than First Trust Cboe. It trades about -0.1 of its total potential returns per unit of risk. First Trust Cboe is currently generating about -0.04 per unit of volatility. If you would invest  3,052  in First Trust Cboe on December 29, 2024 and sell it today you would lose (52.00) from holding First Trust Cboe or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

AllianzIM Equity Buffer15  vs.  First Trust Cboe

AllianzIM Equity Buffer15

Risk-Adjusted Performance

Very Weak

Over the last 90 days AllianzIM Equity Buffer15 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AllianzIM Equity is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Cboe

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Cboe has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AllianzIM Equity and First Trust

The main advantage of trading using opposite AllianzIM Equity and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AllianzIM Equity 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 AllianzIM Equity Buffer15 and First Trust Cboe 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.