Correlation Between Adaptive Alpha and First Trust
Can any of the company-specific risk be diversified away by investing in both Adaptive Alpha 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 Adaptive Alpha and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaptive Alpha Opportunities and First Trust Dorsey, you can compare the effects of market volatilities on Adaptive Alpha 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 Adaptive Alpha with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptive Alpha and First Trust.
Diversification Opportunities for Adaptive Alpha and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adaptive and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Adaptive Alpha Opportunities and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and Adaptive Alpha 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 Adaptive Alpha Opportunities 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 Dorsey has no effect on the direction of Adaptive Alpha i.e., Adaptive Alpha and First Trust go up and down completely randomly.
Pair Corralation between Adaptive Alpha and First Trust
Given the investment horizon of 90 days Adaptive Alpha Opportunities is expected to generate 2.09 times more return on investment than First Trust. However, Adaptive Alpha is 2.09 times more volatile than First Trust Dorsey. It trades about 0.14 of its potential returns per unit of risk. First Trust Dorsey is currently generating about 0.2 per unit of risk. If you would invest 2,723 in Adaptive Alpha Opportunities on November 9, 2024 and sell it today you would earn a total of 115.00 from holding Adaptive Alpha Opportunities or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaptive Alpha Opportunities vs. First Trust Dorsey
Performance |
| Timeline |
| Adaptive Alpha Oppor |
| First Trust Dorsey |
Adaptive Alpha and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaptive Alpha and First Trust
The main advantage of trading using opposite Adaptive Alpha and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptive Alpha 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.| Adaptive Alpha vs. First Trust Active | Adaptive Alpha vs. Absolute Core Strategy | Adaptive Alpha vs. Pacer Lunt Large | Adaptive Alpha vs. SmartETFs Asia Pacific |
| First Trust vs. First Trust Dorsey | First Trust vs. First Trust Mid | First Trust vs. First Trust Small | First Trust vs. First Trust Dorsey |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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