Correlation Between STF Tactical and First Trust

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

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

Diversification Opportunities for STF Tactical and First Trust

0.96

Correlation Coefficient

STF Tactical  First Trust

Almost no diversification

The 3 months correlation between STF and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding STF Tactical Growth 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 STF Tactical 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 STF Tactical Growth 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 STF Tactical i.e., STF Tactical and First Trust go up and down completely randomly.

Pair Corralation between STF Tactical and First Trust

Given the investment horizon of 90 days STF Tactical Growth is expected to generate 1.45 times more return on investment than First Trust. However, STF Tactical is 1.45 times more volatile than First Trust Nasdaq. It trades about 0.11 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.13 per unit of risk. If you would invest  1,944  in STF Tactical Growth on September 14, 2024 and sell it today you would earn a total of  554.00  from holding STF Tactical Growth or generate 28.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

STF Tactical Growth  vs.  First Trust Nasdaq

STF Tactical Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, STF Tactical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust Nasdaq

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with STF Tactical and First Trust

The main advantage of trading using opposite STF Tactical and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STF Tactical 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 STF Tactical Growth 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.