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 Multi Asset and Ocean Park International, 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
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Ocean is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and Ocean Park International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Park International 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 Multi Asset 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 International 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 Multi Asset is expected to generate 0.54 times more return on investment than Ocean Park. However, First Trust Multi Asset is 1.86 times less risky than Ocean Park. It trades about 0.24 of its potential returns per unit of risk. Ocean Park International is currently generating about -0.01 per unit of risk. If you would invest 1,630 in First Trust Multi Asset on September 5, 2024 and sell it today you would earn a total of 38.00 from holding First Trust Multi Asset or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Multi Asset vs. Ocean Park International
Performance |
| Timeline |
| First Trust Multi |
| Ocean Park International |
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. WisdomTree 9060 Balanced | First Trust vs. Aquagold International | First Trust vs. Morningstar Unconstrained Allocation | First Trust vs. High Yield Municipal Fund |
| Ocean Park vs. iShares Core SP | Ocean Park vs. iShares Core 1 5 | Ocean Park vs. iShares Core MSCI | Ocean Park vs. iShares Core SP |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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