Correlation Between First Trust and Alpha Blue
Can any of the company-specific risk be diversified away by investing in both First Trust and Alpha Blue 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 Alpha Blue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Alpha Blue Capital, you can compare the effects of market volatilities on First Trust and Alpha Blue 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 Alpha Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Alpha Blue.
Diversification Opportunities for First Trust and Alpha Blue
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Alpha is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Alpha Blue Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Blue Capital 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 Dorsey are associated (or correlated) with Alpha Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Blue Capital has no effect on the direction of First Trust i.e., First Trust and Alpha Blue go up and down completely randomly.
Pair Corralation between First Trust and Alpha Blue
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 1.2 times more return on investment than Alpha Blue. However, First Trust is 1.2 times more volatile than Alpha Blue Capital. It trades about 0.08 of its potential returns per unit of risk. Alpha Blue Capital is currently generating about 0.09 per unit of risk. If you would invest 4,675 in First Trust Dorsey on August 27, 2024 and sell it today you would earn a total of 1,441 from holding First Trust Dorsey or generate 30.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 75.81% |
| Values | Daily Returns |
First Trust Dorsey vs. Alpha Blue Capital
Performance |
| Timeline |
| First Trust Dorsey |
| Alpha Blue Capital |
First Trust and Alpha Blue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Alpha Blue
The main advantage of trading using opposite First Trust and Alpha Blue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Alpha Blue 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 Alpha Blue will offset losses from the drop in Alpha Blue's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| Alpha Blue vs. Matthews China Discovery | Alpha Blue vs. Matthews Emerging Markets | Alpha Blue vs. Neuberger Berman ETF | Alpha Blue vs. Fidelity Small Mid Cap |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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