Correlation Between SCOR PK and First Trust

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

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

Diversification Opportunities for SCOR PK and First Trust

0.67

Correlation Coefficient

SCOR PK  First Trust

Poor diversification

The 3 months correlation between SCOR and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and SCOR PK 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 SCOR PK 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 NASDAQ has no effect on the direction of SCOR PK i.e., SCOR PK and First Trust go up and down completely randomly.

Pair Corralation between SCOR PK and First Trust

Assuming the 90 days horizon SCOR PK is expected to generate 5.62 times less return on investment than First Trust. In addition to that, SCOR PK is 1.99 times more volatile than First Trust NASDAQ. It trades about 0.03 of its total potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.33 per unit of volatility. If you would invest  6,135  in First Trust NASDAQ on September 16, 2024 and sell it today you would earn a total of  419.00  from holding First Trust NASDAQ or generate 6.83% return on investment over 90 days.

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

SCOR PK  vs.  First Trust NASDAQ

SCOR PK

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SCOR PK and First Trust

The main advantage of trading using opposite SCOR PK and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOR PK 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 SCOR PK and First Trust NASDAQ 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.