Correlation Between First Trust and Tortoise Global

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

By analyzing existing cross correlation between First Trust Exchange Traded and Tortoise Global Water, you can compare the effects of market volatilities on First Trust and Tortoise Global 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 Tortoise Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Tortoise Global.

Diversification Opportunities for First Trust and Tortoise Global

0.2

Correlation Coefficient

First Trust  Tortoise Global

Modest diversification

The 3 months correlation between First and Tortoise is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Tortoise Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tortoise Global Water 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 Exchange Traded are associated (or correlated) with Tortoise Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tortoise Global Water has no effect on the direction of First Trust i.e., First Trust and Tortoise Global go up and down completely randomly.

Pair Corralation between First Trust and Tortoise Global

Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the Tortoise Global. In addition to that, First Trust is 1.17 times more volatile than Tortoise Global Water. It trades about -0.01 of its total potential returns per unit of risk. Tortoise Global Water is currently generating about 0.04 per unit of volatility. If you would invest  4,742  in Tortoise Global Water on December 20, 2024 and sell it today you would earn a total of  76.00  from holding Tortoise Global Water or generate 1.6% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  Tortoise Global Water

First Trust Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tortoise Global Water

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tortoise Global Water are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Tortoise Global is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and Tortoise Global

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

The idea behind First Trust Exchange Traded and Tortoise Global Water 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.