Correlation Between First Trust and Angel Oak

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

By analyzing existing cross correlation between First Trust TCW and Angel Oak Income, you can compare the effects of market volatilities on First Trust and Angel Oak 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 Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Angel Oak.

Diversification Opportunities for First Trust and Angel Oak

0.93

Correlation Coefficient

First Trust  Angel Oak

Almost no diversification

The 3 months correlation between First and Angel is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Angel Oak Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Income 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 TCW are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Income has no effect on the direction of First Trust i.e., First Trust and Angel Oak go up and down completely randomly.

Pair Corralation between First Trust and Angel Oak

Given the investment horizon of 90 days First Trust TCW is expected to under-perform the Angel Oak. In addition to that, First Trust is 2.55 times more volatile than Angel Oak Income. It trades about -0.04 of its total potential returns per unit of risk. Angel Oak Income is currently generating about 0.02 per unit of volatility. If you would invest  2,076  in Angel Oak Income on September 2, 2024 and sell it today you would earn a total of  4.00  from holding Angel Oak Income or generate 0.19% return on investment over 90 days.

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

First Trust TCW  vs.  Angel Oak Income

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Angel Oak Income

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Angel Oak is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Angel Oak

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

The idea behind First Trust TCW and Angel Oak Income 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.