Correlation Between Ocean Park and First Trust
Can any of the company-specific risk be diversified away by investing in both Ocean Park 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 Ocean Park and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ocean Park High and First Trust Senior, you can compare the effects of market volatilities on Ocean Park 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 Ocean Park with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and First Trust.
Diversification Opportunities for Ocean Park and First Trust
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ocean and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Ocean Park 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 Ocean Park High 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 Senior has no effect on the direction of Ocean Park i.e., Ocean Park and First Trust go up and down completely randomly.
Pair Corralation between Ocean Park and First Trust
Given the investment horizon of 90 days Ocean Park is expected to generate 1.16 times less return on investment than First Trust. In addition to that, Ocean Park is 1.65 times more volatile than First Trust Senior. It trades about 0.14 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.27 per unit of volatility. If you would invest 4,034 in First Trust Senior on August 27, 2024 and sell it today you would earn a total of 591.00 from holding First Trust Senior or generate 14.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 26.01% |
| Values | Daily Returns |
Ocean Park High vs. First Trust Senior
Performance |
| Timeline |
| Ocean Park High |
| First Trust Senior |
Ocean Park and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ocean Park and First Trust
The main advantage of trading using opposite Ocean Park and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Park 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.| Ocean Park vs. First Trust Senior | Ocean Park vs. First Trust Low | Ocean Park vs. First Trust Enhanced | Ocean Park vs. First Trust TCW |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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