Correlation Between First Trust and Franklin Exponential

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

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

Diversification Opportunities for First Trust and Franklin Exponential

0.87

Correlation Coefficient

First Trust  Franklin Exponential

Very poor diversification

The 3 months correlation between First and Franklin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Franklin Exponential Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Exponential Data and First Trust 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 Trust NASDAQ are associated (or correlated) with Franklin Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Exponential Data has no effect on the direction of First Trust i.e., First Trust and Franklin Exponential go up and down completely randomly.

Pair Corralation between First Trust and Franklin Exponential

Given the investment horizon of 90 days First Trust is expected to generate 2.24 times less return on investment than Franklin Exponential. In addition to that, First Trust is 1.11 times more volatile than Franklin Exponential Data. It trades about 0.09 of its total potential returns per unit of risk. Franklin Exponential Data is currently generating about 0.21 per unit of volatility. If you would invest  2,301  in Franklin Exponential Data on August 30, 2024 and sell it today you would earn a total of  354.00  from holding Franklin Exponential Data or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

First Trust NASDAQ  vs.  Franklin Exponential Data

First Trust NASDAQ

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Franklin Exponential Data

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Exponential Data are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Franklin Exponential unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Franklin Exponential

The main advantage of trading using opposite First Trust and Franklin Exponential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Franklin Exponential 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 Franklin Exponential will offset losses from the drop in Franklin Exponential's long position.

The idea behind First Trust NASDAQ and Franklin Exponential Data 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.