Correlation Between Snap and First Trust
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and First Trust Preferred, you can compare the effects of market volatilities on Snap 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 Snap with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and First Trust.
Diversification Opportunities for Snap and First Trust
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and Snap 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 Snap Inc 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 Preferred has no effect on the direction of Snap i.e., Snap and First Trust go up and down completely randomly.
Pair Corralation between Snap and First Trust
Given the investment horizon of 90 days Snap Inc is expected to generate 17.22 times more return on investment than First Trust. However, Snap is 17.22 times more volatile than First Trust Preferred. It trades about 0.12 of its potential returns per unit of risk. First Trust Preferred is currently generating about -0.18 per unit of risk. If you would invest 1,027 in Snap Inc on August 25, 2024 and sell it today you would earn a total of 115.00 from holding Snap Inc or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Snap Inc vs. First Trust Preferred
Performance |
| Timeline |
| Snap Inc |
| First Trust Preferred |
Snap and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and First Trust
The main advantage of trading using opposite Snap and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc and First Trust Preferred 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. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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