Correlation Between First Trust and Esoterica NextG

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

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

Diversification Opportunities for First Trust and Esoterica NextG

-0.01

Correlation Coefficient

First Trust  Esoterica NextG

Good diversification

The 3 months correlation between First and Esoterica is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Esoterica NextG Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esoterica NextG Economy 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 NASDAQ are associated (or correlated) with Esoterica NextG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esoterica NextG Economy has no effect on the direction of First Trust i.e., First Trust and Esoterica NextG go up and down completely randomly.

Pair Corralation between First Trust and Esoterica NextG

Given the investment horizon of 90 days First Trust is expected to generate 5.86 times less return on investment than Esoterica NextG. But when comparing it to its historical volatility, First Trust NASDAQ is 1.99 times less risky than Esoterica NextG. It trades about 0.07 of its potential returns per unit of risk. Esoterica NextG Economy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,628  in Esoterica NextG Economy on September 18, 2024 and sell it today you would earn a total of  1,248  from holding Esoterica NextG Economy or generate 18.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

First Trust NASDAQ  vs.  Esoterica NextG Economy

First Trust NASDAQ

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Esoterica NextG Economy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Esoterica NextG Economy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, Esoterica NextG demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Esoterica NextG

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

The idea behind First Trust NASDAQ and Esoterica NextG Economy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.