Correlation Between FT Vest and Themes Small

Can any of the company-specific risk be diversified away by investing in both FT Vest and Themes Small 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 FT Vest and Themes Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest Equity and Themes Small Cap, you can compare the effects of market volatilities on FT Vest and Themes Small 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 FT Vest with a short position of Themes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and Themes Small.

Diversification Opportunities for FT Vest and Themes Small

0.06

Correlation Coefficient

FT Vest  Themes Small

Significant diversification

The 3 months correlation between DHDG and Themes is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and Themes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Small Cap and FT Vest 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 FT Vest Equity are associated (or correlated) with Themes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Small Cap has no effect on the direction of FT Vest i.e., FT Vest and Themes Small go up and down completely randomly.

Pair Corralation between FT Vest and Themes Small

Given the investment horizon of 90 days FT Vest is expected to generate 3.02 times less return on investment than Themes Small. But when comparing it to its historical volatility, FT Vest Equity is 3.19 times less risky than Themes Small. It trades about 0.17 of its potential returns per unit of risk. Themes Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,918  in Themes Small Cap on September 12, 2024 and sell it today you would earn a total of  352.00  from holding Themes Small Cap or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

FT Vest Equity  vs.  Themes Small Cap

FT Vest Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Themes Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Small Cap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Themes Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FT Vest and Themes Small

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

The idea behind FT Vest Equity and Themes Small Cap 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.