Correlation Between First Trust and Urbana
Can any of the company-specific risk be diversified away by investing in both First Trust and Urbana 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 Urbana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and Urbana, you can compare the effects of market volatilities on First Trust and Urbana 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 Urbana. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Urbana.
Diversification Opportunities for First Trust and Urbana
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Urbana is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Urbana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urbana 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 Senior are associated (or correlated) with Urbana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urbana has no effect on the direction of First Trust i.e., First Trust and Urbana go up and down completely randomly.
Pair Corralation between First Trust and Urbana
Considering the 90-day investment horizon First Trust is expected to generate 3.77 times less return on investment than Urbana. But when comparing it to its historical volatility, First Trust Senior is 2.62 times less risky than Urbana. It trades about 0.18 of its potential returns per unit of risk. Urbana is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 387.00 in Urbana on August 28, 2024 and sell it today you would earn a total of 29.00 from holding Urbana or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Senior vs. Urbana
Performance |
| Timeline |
| First Trust Senior |
| Urbana |
First Trust and Urbana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Urbana
The main advantage of trading using opposite First Trust and Urbana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Urbana 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 Urbana will offset losses from the drop in Urbana's long position.| First Trust vs. Federated Premier Municipal | First Trust vs. Blackrock Muniyield | First Trust vs. Diamond Hill Investment | First Trust vs. NXG NextGen Infrastructure |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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