Correlation Between Deka STOXX and First Trust

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

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

Diversification Opportunities for Deka STOXX and First Trust

0.0

Correlation Coefficient

Deka STOXX  First Trust

Pay attention - limited upside

The 3 months correlation between Deka and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Deka STOXX Europe and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and Deka STOXX 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 Deka STOXX Europe 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 Global has no effect on the direction of Deka STOXX i.e., Deka STOXX and First Trust go up and down completely randomly.

Pair Corralation between Deka STOXX and First Trust

If you would invest  2,258  in First Trust Global on September 16, 2024 and sell it today you would earn a total of  235.00  from holding First Trust Global or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.52%
Values	Daily Returns

Deka STOXX Europe  vs.  First Trust Global

Deka STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka STOXX Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deka STOXX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Global

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile 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 Deka STOXX and First Trust

The main advantage of trading using opposite Deka STOXX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deka STOXX 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 Deka STOXX Europe and First Trust Global 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.