Correlation Between First Trust and Fidelity Preferred
Can any of the company-specific risk be diversified away by investing in both First Trust and Fidelity Preferred 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 Fidelity Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Institutional and Fidelity Preferred Securities, you can compare the effects of market volatilities on First Trust and Fidelity Preferred 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 Fidelity Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Fidelity Preferred.
Diversification Opportunities for First Trust and Fidelity Preferred
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Fidelity is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Institutional and Fidelity Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Preferred 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 Institutional are associated (or correlated) with Fidelity Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Preferred has no effect on the direction of First Trust i.e., First Trust and Fidelity Preferred go up and down completely randomly.
Pair Corralation between First Trust and Fidelity Preferred
Given the investment horizon of 90 days First Trust Institutional is expected to generate 0.96 times more return on investment than Fidelity Preferred. However, First Trust Institutional is 1.04 times less risky than Fidelity Preferred. It trades about 0.22 of its potential returns per unit of risk. Fidelity Preferred Securities is currently generating about 0.18 per unit of risk. If you would invest 1,509 in First Trust Institutional on August 30, 2024 and sell it today you would earn a total of 371.00 from holding First Trust Institutional or generate 24.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Institutional vs. Fidelity Preferred Securities
Performance |
| Timeline |
| First Trust Institutional |
| Fidelity Preferred |
First Trust and Fidelity Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Fidelity Preferred
The main advantage of trading using opposite First Trust and Fidelity Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Fidelity Preferred 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 Fidelity Preferred will offset losses from the drop in Fidelity Preferred's long position.| First Trust vs. First Trust Preferred | First Trust vs. First Trust Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced |
| Fidelity Preferred vs. Fidelity Investment Grade | Fidelity Preferred vs. Fidelity Investment Grade | Fidelity Preferred vs. Fidelity High Yield | Fidelity Preferred vs. Fidelity Corporate Bond |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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