Correlation Between First Asset and First Trust
Can any of the company-specific risk be diversified away by investing in both First Asset 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 First Asset and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Asset Tech and First Trust Cboe, you can compare the effects of market volatilities on First Asset 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 First Asset with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and First Trust.
Diversification Opportunities for First Asset and First Trust
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Tech and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and First Asset 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 First Asset Tech 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 Cboe has no effect on the direction of First Asset i.e., First Asset and First Trust go up and down completely randomly.
Pair Corralation between First Asset and First Trust
Assuming the 90 days trading horizon First Asset is expected to generate 1.21 times less return on investment than First Trust. In addition to that, First Asset is 5.39 times more volatile than First Trust Cboe. It trades about 0.05 of its total potential returns per unit of risk. First Trust Cboe is currently generating about 0.31 per unit of volatility. If you would invest 4,294 in First Trust Cboe on August 29, 2024 and sell it today you would earn a total of 68.00 from holding First Trust Cboe or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Asset Tech vs. First Trust Cboe
Performance |
| Timeline |
| First Asset Tech |
| First Trust Cboe |
First Asset and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Asset and First Trust
The main advantage of trading using opposite First Asset and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset 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.| First Asset vs. BMO Covered Call | First Asset vs. BMO Canadian High | First Asset vs. BMO Europe High | First Asset vs. Harvest Healthcare Leaders |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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