Correlation Between First Trust and RiverFront Dynamic

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

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

Diversification Opportunities for First Trust and RiverFront Dynamic

-0.33

Correlation Coefficient

First Trust  RiverFront Dynamic

Very good diversification

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

Pair Corralation between First Trust and RiverFront Dynamic

Given the investment horizon of 90 days First Trust is expected to generate 5.55 times less return on investment than RiverFront Dynamic. In addition to that, First Trust is 1.59 times more volatile than RiverFront Dynamic Flex Cap. It trades about 0.02 of its total potential returns per unit of risk. RiverFront Dynamic Flex Cap is currently generating about 0.15 per unit of volatility. If you would invest  5,643  in RiverFront Dynamic Flex Cap on September 14, 2024 and sell it today you would earn a total of  354.00  from holding RiverFront Dynamic Flex Cap or generate 6.27% return on investment over 90 days.

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

First Trust RiverFront  vs.  RiverFront Dynamic Flex Cap

First Trust RiverFront

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust RiverFront are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

RiverFront Dynamic Flex

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RiverFront Dynamic Flex Cap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and RiverFront Dynamic

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

The idea behind First Trust RiverFront and RiverFront Dynamic Flex Cap 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.