Correlation Between First Trust and Themes European

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Can any of the company-specific risk be diversified away by investing in both First Trust and Themes European 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 Themes European 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 Themes European Luxury, you can compare the effects of market volatilities on First Trust and Themes European 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 Themes European. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Themes European.

Diversification Opportunities for First Trust and Themes European

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between First and Themes is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Themes European Luxury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes European Luxury 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 Themes European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes European Luxury has no effect on the direction of First Trust i.e., First Trust and Themes European go up and down completely randomly.

Pair Corralation between First Trust and Themes European

Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the Themes European. In addition to that, First Trust is 1.54 times more volatile than Themes European Luxury. It trades about -0.02 of its total potential returns per unit of risk. Themes European Luxury is currently generating about -0.02 per unit of volatility. If you would invest  2,446  in Themes European Luxury on October 10, 2024 and sell it today you would lose (237.00) from holding Themes European Luxury or give up 9.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy53.63%
ValuesDaily Returns

First Trust NASDAQ  vs.  Themes European Luxury

 Performance 
       Timeline  
First Trust NASDAQ 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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. In spite of very weak essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Themes European Luxury 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Themes European Luxury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Themes European is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust and Themes European Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Themes European

The main advantage of trading using opposite First Trust and Themes European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Themes European 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 Themes European will offset losses from the drop in Themes European's long position.
The idea behind First Trust NASDAQ and Themes European Luxury 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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