Correlation Between First Trust and Angel Oak
Can any of the company-specific risk be diversified away by investing in both First Trust and Angel Oak 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 Angel Oak 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 Angel Oak Financial, you can compare the effects of market volatilities on First Trust and Angel Oak 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 Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Angel Oak.
Diversification Opportunities for First Trust and Angel Oak
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Angel is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Angel Oak Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Financial 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Financial has no effect on the direction of First Trust i.e., First Trust and Angel Oak go up and down completely randomly.
Pair Corralation between First Trust and Angel Oak
Considering the 90-day investment horizon First Trust Specialty is expected to generate 5.55 times more return on investment than Angel Oak. However, First Trust is 5.55 times more volatile than Angel Oak Financial. It trades about 0.08 of its potential returns per unit of risk. Angel Oak Financial is currently generating about 0.01 per unit of risk. If you would invest 425.00 in First Trust Specialty on November 3, 2024 and sell it today you would earn a total of 16.00 from holding First Trust Specialty or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
First Trust Specialty vs. Angel Oak Financial
Performance |
| Timeline |
| First Trust Specialty |
| Angel Oak Financial |
First Trust and Angel Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Angel Oak
The main advantage of trading using opposite First Trust and Angel Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Angel Oak 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 Angel Oak will offset losses from the drop in Angel Oak's long position.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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