Correlation Between First Trust and Sprott Energy
Can any of the company-specific risk be diversified away by investing in both First Trust and Sprott Energy 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 Sprott Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Materials and Sprott Energy Transition, you can compare the effects of market volatilities on First Trust and Sprott Energy 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 Sprott Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Sprott Energy.
Diversification Opportunities for First Trust and Sprott Energy
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Sprott is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Materials and Sprott Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Energy Transition 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 Materials are associated (or correlated) with Sprott Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Energy Transition has no effect on the direction of First Trust i.e., First Trust and Sprott Energy go up and down completely randomly.
Pair Corralation between First Trust and Sprott Energy
Considering the 90-day investment horizon First Trust Materials is expected to generate 0.73 times more return on investment than Sprott Energy. However, First Trust Materials is 1.37 times less risky than Sprott Energy. It trades about -0.06 of its potential returns per unit of risk. Sprott Energy Transition is currently generating about -0.07 per unit of risk. If you would invest 6,612 in First Trust Materials on August 24, 2024 and sell it today you would lose (127.00) from holding First Trust Materials or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Materials vs. Sprott Energy Transition
Performance |
| Timeline |
| First Trust Materials |
| Sprott Energy Transition |
First Trust and Sprott Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Sprott Energy
The main advantage of trading using opposite First Trust and Sprott Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Sprott Energy 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 Sprott Energy will offset losses from the drop in Sprott Energy's long position.| First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Financials | First Trust vs. First Trust Energy |
| Sprott Energy vs. Sprott Junior Copper | Sprott Energy vs. Sprott Junior Uranium | Sprott Energy vs. Sprott Nickel Miners | Sprott Energy vs. Sprott Uranium Miners |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |