Correlation Between Themes Transatlantic and First Trust

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

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

Diversification Opportunities for Themes Transatlantic and First Trust

-0.66

Correlation Coefficient

Themes Transatlantic  First Trust

Excellent diversification

The 3 months correlation between Themes and First is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Themes Transatlantic Defense and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and Themes Transatlantic 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 Themes Transatlantic Defense 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 Consumer has no effect on the direction of Themes Transatlantic i.e., Themes Transatlantic and First Trust go up and down completely randomly.

Pair Corralation between Themes Transatlantic and First Trust

Given the investment horizon of 90 days Themes Transatlantic Defense is expected to generate 1.08 times more return on investment than First Trust. However, Themes Transatlantic is 1.08 times more volatile than First Trust Consumer. It trades about 0.21 of its potential returns per unit of risk. First Trust Consumer is currently generating about -0.16 per unit of risk. If you would invest  2,544  in Themes Transatlantic Defense on December 19, 2024 and sell it today you would earn a total of  407.00  from holding Themes Transatlantic Defense or generate 16.0% return on investment over 90 days.

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

Themes Transatlantic Defense  vs.  First Trust Consumer

Themes Transatlantic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Themes Transatlantic and First Trust

The main advantage of trading using opposite Themes Transatlantic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Transatlantic 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 Themes Transatlantic Defense and First Trust Consumer 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 CEOs Directory module to screen CEOs from public companies around the world.