Correlation Between Atlanticus Holdings and First Trust

Can any of the company-specific risk be diversified away by investing in both Atlanticus Holdings 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 Atlanticus Holdings and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atlanticus Holdings and First Trust High, you can compare the effects of market volatilities on Atlanticus Holdings 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 Atlanticus Holdings with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlanticus Holdings and First Trust.

Diversification Opportunities for Atlanticus Holdings and First Trust

0.44

Correlation Coefficient

Atlanticus Holdings  First Trust

Very weak diversification

The 3 months correlation between Atlanticus and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Atlanticus Holdings and First Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust High and Atlanticus Holdings 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 Atlanticus Holdings 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 High has no effect on the direction of Atlanticus Holdings i.e., Atlanticus Holdings and First Trust go up and down completely randomly.

Pair Corralation between Atlanticus Holdings and First Trust

Assuming the 90 days horizon Atlanticus Holdings is expected to generate 1.22 times more return on investment than First Trust. However, Atlanticus Holdings is 1.22 times more volatile than First Trust High. It trades about 0.08 of its potential returns per unit of risk. First Trust High is currently generating about 0.05 per unit of risk. If you would invest  2,302  in Atlanticus Holdings on September 16, 2024 and sell it today you would earn a total of  74.00  from holding Atlanticus Holdings or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Atlanticus Holdings  vs.  First Trust High

Atlanticus Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlanticus Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Atlanticus Holdings is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Trust High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atlanticus Holdings and First Trust

The main advantage of trading using opposite Atlanticus Holdings and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlanticus Holdings 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 Atlanticus Holdings and First Trust High 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.