Correlation Between Siren Nasdaq and First Trust

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

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

Diversification Opportunities for Siren Nasdaq and First Trust

0.46

Correlation Coefficient

Siren Nasdaq  First Trust

Very weak diversification

The 3 months correlation between Siren and First is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Siren Nasdaq NexGen and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and Siren Nasdaq 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 Siren Nasdaq NexGen 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 Indxx has no effect on the direction of Siren Nasdaq i.e., Siren Nasdaq and First Trust go up and down completely randomly.

Pair Corralation between Siren Nasdaq and First Trust

Given the investment horizon of 90 days Siren Nasdaq NexGen is expected to generate 2.38 times more return on investment than First Trust. However, Siren Nasdaq is 2.38 times more volatile than First Trust Indxx. It trades about 0.04 of its potential returns per unit of risk. First Trust Indxx is currently generating about 0.09 per unit of risk. If you would invest  2,026  in Siren Nasdaq NexGen on September 13, 2024 and sell it today you would earn a total of  829.00  from holding Siren Nasdaq NexGen or generate 40.92% return on investment over 90 days.

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

Siren Nasdaq NexGen  vs.  First Trust Indxx

Siren Nasdaq NexGen

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siren Nasdaq NexGen are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Siren Nasdaq displayed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Indxx

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Siren Nasdaq and First Trust

The main advantage of trading using opposite Siren Nasdaq and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siren Nasdaq 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 Siren Nasdaq NexGen and First Trust Indxx 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.