Correlation Between First Trust and SAMMON

Can any of the company-specific risk be diversified away by investing in both First Trust and SAMMON 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 SAMMON 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 SAMMON 475 08 APR 32, you can compare the effects of market volatilities on First Trust and SAMMON 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 SAMMON. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SAMMON.

Diversification Opportunities for First Trust and SAMMON

0.66

Correlation Coefficient

First Trust  SAMMON

Poor diversification

The 3 months correlation between First and SAMMON is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and SAMMON 475 08 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAMMON 475 08 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 SAMMON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAMMON 475 08 has no effect on the direction of First Trust i.e., First Trust and SAMMON go up and down completely randomly.

Pair Corralation between First Trust and SAMMON

Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.25 times more return on investment than SAMMON. However, First Trust Exchange Traded is 4.03 times less risky than SAMMON. It trades about 0.22 of its potential returns per unit of risk. SAMMON 475 08 APR 32 is currently generating about -0.71 per unit of risk. If you would invest  2,774  in First Trust Exchange Traded on September 28, 2024 and sell it today you would earn a total of  89.00  from holding First Trust Exchange Traded or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	33.33%
Values	Daily Returns

First Trust Exchange Traded  vs.  SAMMON 475 08 APR 32

First Trust Exchange

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SAMMON 475 08

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAMMON 475 08 APR 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for SAMMON 475 08 APR 32 investors.

Pair Trading with First Trust and SAMMON

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

The idea behind First Trust Exchange Traded and SAMMON 475 08 APR 32 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.