Correlation Between FT Vest and AdvisorShares STAR
Can any of the company-specific risk be diversified away by investing in both FT Vest and AdvisorShares STAR 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 FT Vest and AdvisorShares STAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Vest Dow and AdvisorShares STAR Global, you can compare the effects of market volatilities on FT Vest and AdvisorShares STAR 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 FT Vest with a short position of AdvisorShares STAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and AdvisorShares STAR.
Diversification Opportunities for FT Vest and AdvisorShares STAR
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FDND and AdvisorShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Dow and AdvisorShares STAR Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares STAR Global and FT Vest 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 FT Vest Dow are associated (or correlated) with AdvisorShares STAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares STAR Global has no effect on the direction of FT Vest i.e., FT Vest and AdvisorShares STAR go up and down completely randomly.
Pair Corralation between FT Vest and AdvisorShares STAR
Given the investment horizon of 90 days FT Vest Dow is expected to generate 1.92 times more return on investment than AdvisorShares STAR. However, FT Vest is 1.92 times more volatile than AdvisorShares STAR Global. It trades about 0.38 of its potential returns per unit of risk. AdvisorShares STAR Global is currently generating about 0.09 per unit of risk. If you would invest 2,024 in FT Vest Dow on August 26, 2024 and sell it today you would earn a total of 198.00 from holding FT Vest Dow or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT Vest Dow vs. AdvisorShares STAR Global
Performance |
| Timeline |
| FT Vest Dow |
| AdvisorShares STAR Global |
FT Vest and AdvisorShares STAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT Vest and AdvisorShares STAR
The main advantage of trading using opposite FT Vest and AdvisorShares STAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Vest position performs unexpectedly, AdvisorShares STAR 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 AdvisorShares STAR will offset losses from the drop in AdvisorShares STAR's long position.The idea behind FT Vest Dow and AdvisorShares STAR Global 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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