Correlation Between Sparta Capital and First Trust
Can any of the company-specific risk be diversified away by investing in both Sparta Capital 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 Sparta Capital and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparta Capital and First Trust LongShort, you can compare the effects of market volatilities on Sparta Capital 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 Sparta Capital with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and First Trust.
Diversification Opportunities for Sparta Capital and First Trust
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sparta and First is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort and Sparta Capital 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 Sparta Capital 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 LongShort has no effect on the direction of Sparta Capital i.e., Sparta Capital and First Trust go up and down completely randomly.
Pair Corralation between Sparta Capital and First Trust
Assuming the 90 days horizon Sparta Capital is expected to under-perform the First Trust. In addition to that, Sparta Capital is 9.82 times more volatile than First Trust LongShort. It trades about -0.21 of its total potential returns per unit of risk. First Trust LongShort is currently generating about 0.17 per unit of volatility. If you would invest 6,439 in First Trust LongShort on August 25, 2024 and sell it today you would earn a total of 124.00 from holding First Trust LongShort or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparta Capital vs. First Trust LongShort
Performance |
| Timeline |
| Sparta Capital |
| First Trust LongShort |
Sparta Capital and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparta Capital and First Trust
The main advantage of trading using opposite Sparta Capital and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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.| Sparta Capital vs. Zurn Elkay Water | Sparta Capital vs. Federal Signal | Sparta Capital vs. Energy Recovery | Sparta Capital vs. CECO Environmental Corp |
| First Trust vs. First Trust Managed | First Trust vs. IQ Hedge Multi Strategy | First Trust vs. First Trust BuyWrite | First Trust vs. SPDR SSgA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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