Correlation Between First Trust and Ocean Park
Can any of the company-specific risk be diversified away by investing in both First Trust and Ocean Park 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 Ocean Park into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and Ocean Park High, you can compare the effects of market volatilities on First Trust and Ocean Park 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 Ocean Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Ocean Park.
Diversification Opportunities for First Trust and Ocean Park
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Ocean is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Ocean Park High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Park High 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 Enhanced are associated (or correlated) with Ocean Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Park High has no effect on the direction of First Trust i.e., First Trust and Ocean Park go up and down completely randomly.
Pair Corralation between First Trust and Ocean Park
Given the investment horizon of 90 days First Trust is expected to generate 1.54 times less return on investment than Ocean Park. But when comparing it to its historical volatility, First Trust Enhanced is 7.63 times less risky than Ocean Park. It trades about 0.53 of its potential returns per unit of risk. Ocean Park High is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,547 in Ocean Park High on August 31, 2024 and sell it today you would earn a total of 13.00 from holding Ocean Park High or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. Ocean Park High
Performance |
| Timeline |
| First Trust Enhanced |
| Ocean Park High |
First Trust and Ocean Park Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Ocean Park
The main advantage of trading using opposite First Trust and Ocean Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Ocean Park 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 Ocean Park will offset losses from the drop in Ocean Park's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| Ocean Park vs. Xtrackers High Beta | Ocean Park vs. Xtrackers Short Duration | Ocean Park vs. FlexShares High Yield | Ocean Park vs. iShares Edge High |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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