Correlation Between RiverFront Dynamic and First Trust

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Can any of the company-specific risk be diversified away by investing in both RiverFront Dynamic and First Trust 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 RiverFront Dynamic and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RiverFront Dynamic Dividend and First Trust Exchange Traded, you can compare the effects of market volatilities on RiverFront Dynamic and First Trust 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 RiverFront Dynamic with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of RiverFront Dynamic and First Trust.

Diversification Opportunities for RiverFront Dynamic and First Trust

RiverFrontFirstDiversified AwayRiverFrontFirstDiversified Away100%
0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between RiverFront and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding RiverFront Dynamic Dividend and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and RiverFront Dynamic 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 RiverFront Dynamic Dividend are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of RiverFront Dynamic i.e., RiverFront Dynamic and First Trust go up and down completely randomly.

Pair Corralation between RiverFront Dynamic and First Trust

Given the investment horizon of 90 days RiverFront Dynamic Dividend is expected to generate 1.2 times more return on investment than First Trust. However, RiverFront Dynamic is 1.2 times more volatile than First Trust Exchange Traded. It trades about 0.08 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.07 per unit of risk. If you would invest  4,884  in RiverFront Dynamic Dividend on November 24, 2024 and sell it today you would earn a total of  734.00  from holding RiverFront Dynamic Dividend or generate 15.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

RiverFront Dynamic Dividend  vs.  First Trust Exchange Traded

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -3-2-101234
JavaScript chart by amCharts 3.21.15RFDA SAUG
       Timeline  
RiverFront Dynamic 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days RiverFront Dynamic Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb54.55555.55656.55757.55858.5
First Trust Exchange 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb23.423.623.82424.224.4

RiverFront Dynamic and First Trust Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.43-1.07-0.71-0.35-0.04190.180.540.91.261.62 0.20.40.60.81.01.21.4
JavaScript chart by amCharts 3.21.15RFDA SAUG
       Returns  

Pair Trading with RiverFront Dynamic and First Trust

The main advantage of trading using opposite RiverFront Dynamic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RiverFront Dynamic position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.
The idea behind RiverFront Dynamic Dividend and First Trust Exchange Traded pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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