Correlation Between First Trust and Starboard Investment

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

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

Diversification Opportunities for First Trust and Starboard Investment

0.49

Correlation Coefficient

First Trust  Starboard Investment

Very weak diversification

The 3 months correlation between First and Starboard is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Starboard Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starboard Investment and First Trust 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 First Trust TCW are associated (or correlated) with Starboard Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starboard Investment has no effect on the direction of First Trust i.e., First Trust and Starboard Investment go up and down completely randomly.

Pair Corralation between First Trust and Starboard Investment

Given the investment horizon of 90 days First Trust TCW is expected to generate 0.22 times more return on investment than Starboard Investment. However, First Trust TCW is 4.61 times less risky than Starboard Investment. It trades about -0.21 of its potential returns per unit of risk. Starboard Investment Trust is currently generating about -0.11 per unit of risk. If you would invest  2,473  in First Trust TCW on October 1, 2024 and sell it today you would lose (14.00) from holding First Trust TCW or give up 0.57% of portfolio value over 90 days.

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

First Trust TCW  vs.  Starboard Investment Trust

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Starboard Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starboard Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Starboard Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Starboard Investment

The main advantage of trading using opposite First Trust and Starboard Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Starboard Investment 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 Starboard Investment will offset losses from the drop in Starboard Investment's long position.

The idea behind First Trust TCW and Starboard Investment Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.