Correlation Between Scottish Mortgage and FIRST TRUST

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

Diversification Opportunities for Scottish Mortgage and FIRST TRUST

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Scottish and FIRST is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and FIRST TRUST GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST TRUST GLOBAL and Scottish Mortgage 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 Scottish Mortgage Investment 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 GLOBAL has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and FIRST TRUST go up and down completely randomly.

Pair Corralation between Scottish Mortgage and FIRST TRUST

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 1.9 times more return on investment than FIRST TRUST. However, Scottish Mortgage is 1.9 times more volatile than FIRST TRUST GLOBAL. It trades about 0.06 of its potential returns per unit of risk. FIRST TRUST GLOBAL is currently generating about 0.01 per unit of risk. If you would invest  78,659  in Scottish Mortgage Investment on September 25, 2024 and sell it today you would earn a total of  16,041  from holding Scottish Mortgage Investment or generate 20.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy93.23%
ValuesDaily Returns

Scottish Mortgage Investment  vs.  FIRST TRUST GLOBAL

 Performance 
       Timeline  
Scottish Mortgage 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Scottish Mortgage exhibited solid returns over the last few months and may actually be approaching a breakup point.
FIRST TRUST GLOBAL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FIRST TRUST GLOBAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FIRST TRUST is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Scottish Mortgage and FIRST TRUST Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Scottish Mortgage and FIRST TRUST

The main advantage of trading using opposite Scottish Mortgage and FIRST TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage 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 Scottish Mortgage Investment and FIRST TRUST GLOBAL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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