Correlation Between USCF SummerHaven and First Trust

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

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

Diversification Opportunities for USCF SummerHaven and First Trust

0.69

Correlation Coefficient

USCF SummerHaven  First Trust

Poor diversification

The 3 months correlation between USCF and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding USCF SummerHaven Dynamic and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and USCF SummerHaven 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 USCF SummerHaven Dynamic 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 Alternative has no effect on the direction of USCF SummerHaven i.e., USCF SummerHaven and First Trust go up and down completely randomly.

Pair Corralation between USCF SummerHaven and First Trust

Given the investment horizon of 90 days USCF SummerHaven Dynamic is expected to generate 1.02 times more return on investment than First Trust. However, USCF SummerHaven is 1.02 times more volatile than First Trust Alternative. It trades about 0.17 of its potential returns per unit of risk. First Trust Alternative is currently generating about 0.08 per unit of risk. If you would invest  1,943  in USCF SummerHaven Dynamic on December 24, 2024 and sell it today you would earn a total of  153.00  from holding USCF SummerHaven Dynamic or generate 7.87% return on investment over 90 days.

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

USCF SummerHaven Dynamic  vs.  First Trust Alternative

USCF SummerHaven Dynamic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USCF SummerHaven Dynamic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, USCF SummerHaven may actually be approaching a critical reversion point that can send shares even higher in April 2025.

First Trust Alternative

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Alternative are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with USCF SummerHaven and First Trust

The main advantage of trading using opposite USCF SummerHaven and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USCF SummerHaven 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 USCF SummerHaven Dynamic and First Trust Alternative 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.