Correlation Between First Trust and AltShares Trust
Can any of the company-specific risk be diversified away by investing in both First Trust and AltShares Trust 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 AltShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust LongShort and AltShares Trust , you can compare the effects of market volatilities on First Trust and AltShares Trust 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 AltShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AltShares Trust.
Diversification Opportunities for First Trust and AltShares Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and AltShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and AltShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltShares Trust 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 LongShort are associated (or correlated) with AltShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltShares Trust has no effect on the direction of First Trust i.e., First Trust and AltShares Trust go up and down completely randomly.
Pair Corralation between First Trust and AltShares Trust
Given the investment horizon of 90 days First Trust LongShort is expected to generate 2.25 times more return on investment than AltShares Trust. However, First Trust is 2.25 times more volatile than AltShares Trust . It trades about 0.11 of its potential returns per unit of risk. AltShares Trust is currently generating about 0.06 per unit of risk. If you would invest 4,873 in First Trust LongShort on September 2, 2024 and sell it today you would earn a total of 1,753 from holding First Trust LongShort or generate 35.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust LongShort vs. AltShares Trust
Performance |
| Timeline |
| First Trust LongShort |
| AltShares Trust |
First Trust and AltShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AltShares Trust
The main advantage of trading using opposite First Trust and AltShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AltShares Trust 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 AltShares Trust will offset losses from the drop in AltShares Trust's long position.| First Trust vs. First Trust Managed | First Trust vs. IQ Hedge Multi Strategy | First Trust vs. First Trust BuyWrite | First Trust vs. SPDR SSgA Global |
| AltShares Trust vs. First Trust Managed | AltShares Trust vs. Franklin Liberty Systematic | AltShares Trust vs. Overlay Shares Foreign | AltShares Trust vs. First Trust LongShort |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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