Correlation Between First Trust and RiverFront Strategic

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

Diversification Opportunities for First Trust and RiverFront Strategic

0.32

Correlation Coefficient

First Trust  RiverFront Strategic

Weak diversification

The 3 months correlation between First and RiverFront is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Trust RiverFront and RiverFront Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Strategic 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Strategic has no effect on the direction of First Trust i.e., First Trust and RiverFront Strategic go up and down completely randomly.

Pair Corralation between First Trust and RiverFront Strategic

Given the investment horizon of 90 days First Trust RiverFront is expected to generate 2.18 times more return on investment than RiverFront Strategic. However, First Trust is 2.18 times more volatile than RiverFront Strategic Income. It trades about 0.02 of its potential returns per unit of risk. RiverFront Strategic Income is currently generating about -0.05 per unit of risk. If you would invest  6,536  in First Trust RiverFront on September 14, 2024 and sell it today you would earn a total of  52.00  from holding First Trust RiverFront or generate 0.8% return on investment over 90 days.

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

First Trust RiverFront  vs.  RiverFront Strategic Income

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 Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RiverFront Strategic Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, RiverFront Strategic is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and RiverFront Strategic

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

The idea behind First Trust RiverFront and RiverFront Strategic Income 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.