Correlation Between First Trust and TrimTabs Donoghue

Can any of the company-specific risk be diversified away by investing in both First Trust and TrimTabs Donoghue 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 TrimTabs Donoghue 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 TrimTabs Donoghue Forlines, you can compare the effects of market volatilities on First Trust and TrimTabs Donoghue 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 TrimTabs Donoghue. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and TrimTabs Donoghue.

Diversification Opportunities for First Trust and TrimTabs Donoghue

0.61

Correlation Coefficient

First Trust  TrimTabs Donoghue

Poor diversification

The 3 months correlation between First and TrimTabs is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and TrimTabs Donoghue Forlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrimTabs Donoghue 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 TrimTabs Donoghue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrimTabs Donoghue has no effect on the direction of First Trust i.e., First Trust and TrimTabs Donoghue go up and down completely randomly.

Pair Corralation between First Trust and TrimTabs Donoghue

Given the investment horizon of 90 days First Trust is expected to generate 5.61 times less return on investment than TrimTabs Donoghue. But when comparing it to its historical volatility, First Trust TCW is 1.12 times less risky than TrimTabs Donoghue. It trades about 0.05 of its potential returns per unit of risk. TrimTabs Donoghue Forlines is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,126  in TrimTabs Donoghue Forlines on September 19, 2024 and sell it today you would earn a total of  17.00  from holding TrimTabs Donoghue Forlines or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.36%
Values	Daily Returns

First Trust TCW  vs.  TrimTabs Donoghue Forlines

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.

TrimTabs Donoghue

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and TrimTabs Donoghue

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

The idea behind First Trust TCW and TrimTabs Donoghue Forlines 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.