Correlation Between Al Frank and First Trust
Can any of the company-specific risk be diversified away by investing in both Al Frank 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 Al Frank and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Al Frank Fund and First Trust Specialty, you can compare the effects of market volatilities on Al Frank 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 Al Frank with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Frank and First Trust.
Diversification Opportunities for Al Frank and First Trust
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between VALAX and First is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Al Frank Fund and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty and Al Frank 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 Al Frank Fund 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 Specialty has no effect on the direction of Al Frank i.e., Al Frank and First Trust go up and down completely randomly.
Pair Corralation between Al Frank and First Trust
Assuming the 90 days horizon Al Frank Fund is expected to under-perform the First Trust. In addition to that, Al Frank is 2.46 times more volatile than First Trust Specialty. It trades about -0.23 of its total potential returns per unit of risk. First Trust Specialty is currently generating about 0.32 per unit of volatility. If you would invest 408.00 in First Trust Specialty on September 14, 2024 and sell it today you would earn a total of 22.00 from holding First Trust Specialty or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Al Frank Fund vs. First Trust Specialty
Performance |
| Timeline |
| Al Frank Fund |
| First Trust Specialty |
Al Frank and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Al Frank and First Trust
The main advantage of trading using opposite Al Frank and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Al Frank 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.| Al Frank vs. Calvert High Yield | Al Frank vs. Ab High Income | Al Frank vs. Ppm High Yield | Al Frank vs. Alliancebernstein Global High |
| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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 Stocks Directory module to find actively traded stocks across global markets.
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