Correlation Between First Trust and Conquer Risk
Can any of the company-specific risk be diversified away by investing in both First Trust and Conquer Risk 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 Conquer Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Conquer Risk Tactical, you can compare the effects of market volatilities on First Trust and Conquer Risk 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 Conquer Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Conquer Risk.
Diversification Opportunities for First Trust and Conquer Risk
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Conquer is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Conquer Risk Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conquer Risk Tactical 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 Specialty are associated (or correlated) with Conquer Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conquer Risk Tactical has no effect on the direction of First Trust i.e., First Trust and Conquer Risk go up and down completely randomly.
Pair Corralation between First Trust and Conquer Risk
Considering the 90-day investment horizon First Trust is expected to generate 1.1 times less return on investment than Conquer Risk. But when comparing it to its historical volatility, First Trust Specialty is 1.29 times less risky than Conquer Risk. It trades about 0.33 of its potential returns per unit of risk. Conquer Risk Tactical is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,034 in Conquer Risk Tactical on August 31, 2024 and sell it today you would earn a total of 56.00 from holding Conquer Risk Tactical or generate 5.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. Conquer Risk Tactical
Performance |
| Timeline |
| First Trust Specialty |
| Conquer Risk Tactical |
First Trust and Conquer Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Conquer Risk
The main advantage of trading using opposite First Trust and Conquer Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Conquer Risk 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 Conquer Risk will offset losses from the drop in Conquer Risk's long position.| First Trust vs. MFS Investment Grade | First Trust vs. Eaton Vance Municipal | First Trust vs. DTF Tax Free | First Trust vs. HUMANA INC |
| Conquer Risk vs. Jpmorgan Equity Income | Conquer Risk vs. Calamos Global Equity | Conquer Risk vs. Ultra Short Fixed Income | Conquer Risk vs. Huber Capital Equity |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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