Correlation Between First Trust and Via Renewables

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

Diversification Opportunities for First Trust and Via Renewables

0.54

Correlation Coefficient

First Trust  Via Renewables

Very weak diversification

The 3 months correlation between First and Via is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of First Trust i.e., First Trust and Via Renewables go up and down completely randomly.

Pair Corralation between First Trust and Via Renewables

Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.21 times more return on investment than Via Renewables. However, First Trust Exchange Traded is 4.75 times less risky than Via Renewables. It trades about 0.52 of its potential returns per unit of risk. Via Renewables is currently generating about 0.05 per unit of risk. If you would invest  1,986  in First Trust Exchange Traded on September 17, 2024 and sell it today you would earn a total of  26.22  from holding First Trust Exchange Traded or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

First Trust Exchange Traded  vs.  Via Renewables

First Trust Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Via Renewables

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Via Renewables is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Via Renewables

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

The idea behind First Trust Exchange Traded and Via Renewables 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.