Correlation Between SCOR PK and First Trust
Can any of the company-specific risk be diversified away by investing in both SCOR PK 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 SCOR PK and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCOR PK and First Trust Equity, you can compare the effects of market volatilities on SCOR PK 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 SCOR PK with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOR PK and First Trust.
Diversification Opportunities for SCOR PK and First Trust
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCOR and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity and SCOR PK 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 SCOR PK 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 Equity has no effect on the direction of SCOR PK i.e., SCOR PK and First Trust go up and down completely randomly.
Pair Corralation between SCOR PK and First Trust
Assuming the 90 days horizon SCOR PK is expected to generate 3.64 times more return on investment than First Trust. However, SCOR PK is 3.64 times more volatile than First Trust Equity. It trades about 0.29 of its potential returns per unit of risk. First Trust Equity is currently generating about 0.25 per unit of risk. If you would invest 210.00 in SCOR PK on September 1, 2024 and sell it today you would earn a total of 38.00 from holding SCOR PK or generate 18.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCOR PK vs. First Trust Equity
Performance |
| Timeline |
| SCOR PK |
| First Trust Equity |
SCOR PK and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCOR PK and First Trust
The main advantage of trading using opposite SCOR PK and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOR PK 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 SCOR PK and First Trust Equity 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.| First Trust vs. iShares Core SP | First Trust vs. iShares Core MSCI | First Trust vs. iShares Broad USD | First Trust 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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