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 Indxx, 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
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ocean and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 Indxx 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 High is expected to generate 0.28 times more return on investment than First Trust. However, Ocean Park High is 3.54 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Indxx is currently generating about -0.01 per unit of risk. If you would invest 2,548 in Ocean Park High on August 30, 2024 and sell it today you would earn a total of 12.00 from holding Ocean Park High or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ocean Park High vs. First Trust Indxx
Performance |
| Timeline |
| Ocean Park High |
| First Trust Indxx |
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. iShares JP Morgan | Ocean Park vs. Fidelity High Yield | Ocean Park vs. Federated Hermes ETF | Ocean Park vs. SPDR SSGA Fixed |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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