Correlation Between TrueShares Structured and First Trust

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

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

Diversification Opportunities for TrueShares Structured and First Trust

1.0

Correlation Coefficient

TrueShares Structured  First Trust

No risk reduction

The 3 months correlation between TrueShares and First is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding TrueShares Structured Outcome and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and TrueShares Structured 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 TrueShares Structured Outcome 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 Cboe has no effect on the direction of TrueShares Structured i.e., TrueShares Structured and First Trust go up and down completely randomly.

Pair Corralation between TrueShares Structured and First Trust

Given the investment horizon of 90 days TrueShares Structured Outcome is expected to generate 1.8 times more return on investment than First Trust. However, TrueShares Structured is 1.8 times more volatile than First Trust Cboe. It trades about 0.21 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.24 per unit of risk. If you would invest  3,798  in TrueShares Structured Outcome on September 12, 2024 and sell it today you would earn a total of  268.00  from holding TrueShares Structured Outcome or generate 7.06% return on investment over 90 days.

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

TrueShares Structured Outcome  vs.  First Trust Cboe

TrueShares Structured

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TrueShares Structured Outcome are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TrueShares Structured may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust Cboe

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Cboe are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, First Trust 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 TrueShares Structured and First Trust

The main advantage of trading using opposite TrueShares Structured and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueShares Structured 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 TrueShares Structured Outcome and First Trust Cboe 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..