Correlation Between First Trust and Altus Power
Can any of the company-specific risk be diversified away by investing in both First Trust and Altus Power 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 Altus Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Utilities and Altus Power, you can compare the effects of market volatilities on First Trust and Altus Power 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 Altus Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Altus Power.
Diversification Opportunities for First Trust and Altus Power
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Altus is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Utilities and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power 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 Utilities are associated (or correlated) with Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of First Trust i.e., First Trust and Altus Power go up and down completely randomly.
Pair Corralation between First Trust and Altus Power
Considering the 90-day investment horizon First Trust is expected to generate 4.15 times less return on investment than Altus Power. But when comparing it to its historical volatility, First Trust Utilities is 8.21 times less risky than Altus Power. It trades about 0.34 of its potential returns per unit of risk. Altus Power is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 344.00 in Altus Power on September 1, 2024 and sell it today you would earn a total of 88.00 from holding Altus Power or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Utilities vs. Altus Power
Performance |
| Timeline |
| First Trust Utilities |
| Altus Power |
First Trust and Altus Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Altus Power
The main advantage of trading using opposite First Trust and Altus Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Altus Power 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 Altus Power will offset losses from the drop in Altus Power's long position.| First Trust vs. Utilities Select Sector | First Trust vs. Vanguard Utilities Index | First Trust vs. Altus Power | First Trust vs. iShares Utilities ETF |
| Altus Power vs. Ormat Technologies | Altus Power vs. Enlight Renewable Energy | Altus Power vs. Fluence Energy | Altus Power vs. Renew Energy Global |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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