Correlation Between First Trust and Franklin Bissett
Can any of the company-specific risk be diversified away by investing in both First Trust and Franklin Bissett 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 Franklin Bissett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and Franklin Bissett Corporate, you can compare the effects of market volatilities on First Trust and Franklin Bissett 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 Franklin Bissett. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Franklin Bissett.
Diversification Opportunities for First Trust and Franklin Bissett
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Franklin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Franklin Bissett Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Bissett Cor 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 Senior are associated (or correlated) with Franklin Bissett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Bissett Cor has no effect on the direction of First Trust i.e., First Trust and Franklin Bissett go up and down completely randomly.
Pair Corralation between First Trust and Franklin Bissett
Assuming the 90 days trading horizon First Trust Senior is expected to generate 4.2 times more return on investment than Franklin Bissett. However, First Trust is 4.2 times more volatile than Franklin Bissett Corporate. It trades about 0.05 of its potential returns per unit of risk. Franklin Bissett Corporate is currently generating about -0.02 per unit of risk. If you would invest 1,692 in First Trust Senior on August 27, 2024 and sell it today you would earn a total of 14.00 from holding First Trust Senior or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. Franklin Bissett Corporate
Performance |
| Timeline |
| First Trust Senior |
| Franklin Bissett Cor |
First Trust and Franklin Bissett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Franklin Bissett
The main advantage of trading using opposite First Trust and Franklin Bissett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Franklin Bissett 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 Franklin Bissett will offset losses from the drop in Franklin Bissett's long position.| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
| Franklin Bissett vs. Franklin Global Aggregate | Franklin Bissett vs. Franklin Large Cap | Franklin Bissett vs. First Trust Senior | Franklin Bissett vs. BMO Aggregate 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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