Correlation Between RiverFront Dynamic and First Trust

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

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

Diversification Opportunities for RiverFront Dynamic and First Trust

-0.33

Correlation Coefficient

RiverFront Dynamic  First Trust

Very good diversification

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

Pair Corralation between RiverFront Dynamic and First Trust

Given the investment horizon of 90 days RiverFront Dynamic Flex Cap is expected to generate 0.62 times more return on investment than First Trust. However, RiverFront Dynamic Flex Cap is 1.61 times less risky than First Trust. It trades about 0.15 of its potential returns per unit of risk. First Trust RiverFront is currently generating about -0.01 per unit of risk. 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	100.0%
Values	Daily Returns

RiverFront Dynamic Flex Cap  vs.  First Trust RiverFront

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.

First Trust RiverFront

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days First Trust RiverFront has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with RiverFront Dynamic and First Trust

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

The idea behind RiverFront Dynamic Flex Cap and First Trust RiverFront 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.