Correlation Between First Trust and Solar Alliance
Can any of the company-specific risk be diversified away by investing in both First Trust and Solar Alliance 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 Solar Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and Solar Alliance Energy, you can compare the effects of market volatilities on First Trust and Solar Alliance 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 Solar Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Solar Alliance.
Diversification Opportunities for First Trust and Solar Alliance
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Solar is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy 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 Indxx are associated (or correlated) with Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of First Trust i.e., First Trust and Solar Alliance go up and down completely randomly.
Pair Corralation between First Trust and Solar Alliance
Assuming the 90 days trading horizon First Trust is expected to generate 1.23 times less return on investment than Solar Alliance. But when comparing it to its historical volatility, First Trust Indxx is 21.74 times less risky than Solar Alliance. It trades about 0.16 of its potential returns per unit of risk. Solar Alliance Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Solar Alliance Energy on September 2, 2024 and sell it today you would lose (2.50) from holding Solar Alliance Energy or give up 41.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
First Trust Indxx vs. Solar Alliance Energy
Performance |
| Timeline |
| First Trust Indxx |
| Solar Alliance Energy |
First Trust and Solar Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Solar Alliance
The main advantage of trading using opposite First Trust and Solar Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Solar Alliance 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 Solar Alliance will offset losses from the drop in Solar Alliance's long position.| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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