Correlation Between FolioBeyond Rising and First Trust

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

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

Diversification Opportunities for FolioBeyond Rising and First Trust

-0.66

Correlation Coefficient

FolioBeyond Rising  First Trust

Excellent diversification

The 3 months correlation between FolioBeyond and First is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding FolioBeyond Rising Rates and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and FolioBeyond Rising 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 FolioBeyond Rising Rates 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 TCW has no effect on the direction of FolioBeyond Rising i.e., FolioBeyond Rising and First Trust go up and down completely randomly.

Pair Corralation between FolioBeyond Rising and First Trust

Given the investment horizon of 90 days FolioBeyond Rising Rates is expected to generate 3.47 times more return on investment than First Trust. However, FolioBeyond Rising is 3.47 times more volatile than First Trust TCW. It trades about 0.3 of its potential returns per unit of risk. First Trust TCW is currently generating about -0.08 per unit of risk. If you would invest  3,297  in FolioBeyond Rising Rates on September 20, 2024 and sell it today you would earn a total of  383.00  from holding FolioBeyond Rising Rates or generate 11.62% return on investment over 90 days.

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

FolioBeyond Rising Rates  vs.  First Trust TCW

FolioBeyond Rising Rates

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FolioBeyond Rising Rates are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, FolioBeyond Rising may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FolioBeyond Rising and First Trust

The main advantage of trading using opposite FolioBeyond Rising and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FolioBeyond Rising 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 FolioBeyond Rising Rates and First Trust TCW 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 Commodity Directory module to find actively traded commodities issued by global exchanges.