Correlation Between Tortoise Global and First Trust

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

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

Diversification Opportunities for Tortoise Global and First Trust

0.55

Correlation Coefficient

Tortoise Global  First Trust

Very weak diversification

The 3 months correlation between Tortoise and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tortoise Global Water and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and Tortoise Global 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 Tortoise Global Water 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 Indxx has no effect on the direction of Tortoise Global i.e., Tortoise Global and First Trust go up and down completely randomly.

Pair Corralation between Tortoise Global and First Trust

Given the investment horizon of 90 days Tortoise Global Water is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Tortoise Global Water is 1.34 times less risky than First Trust. The etf trades about -0.53 of its potential returns per unit of risk. The First Trust Indxx is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,112  in First Trust Indxx on October 12, 2024 and sell it today you would lose (43.00) from holding First Trust Indxx or give up 1.38% of portfolio value over 90 days.

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

Tortoise Global Water  vs.  First Trust Indxx

Tortoise Global Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tortoise Global Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Tortoise Global is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Indxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Indxx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tortoise Global and First Trust

The main advantage of trading using opposite Tortoise Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tortoise Global 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 Tortoise Global Water and First Trust Indxx 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.