Correlation Between First Trust and AlphaMark Actively

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

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

Diversification Opportunities for First Trust and AlphaMark Actively

0.71

Correlation Coefficient

First Trust  AlphaMark Actively

Poor diversification

The 3 months correlation between First and AlphaMark is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and AlphaMark Actively Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaMark Actively 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 Income are associated (or correlated) with AlphaMark Actively. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaMark Actively has no effect on the direction of First Trust i.e., First Trust and AlphaMark Actively go up and down completely randomly.

Pair Corralation between First Trust and AlphaMark Actively

Given the investment horizon of 90 days First Trust Income is expected to under-perform the AlphaMark Actively. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Income is 2.7 times less risky than AlphaMark Actively. The etf trades about -0.04 of its potential returns per unit of risk. The AlphaMark Actively Managed is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,288  in AlphaMark Actively Managed on September 22, 2024 and sell it today you would lose (21.00) from holding AlphaMark Actively Managed or give up 0.64% of portfolio value over 90 days.

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

First Trust Income  vs.  AlphaMark Actively Managed

First Trust Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

AlphaMark Actively

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AlphaMark Actively Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, AlphaMark Actively is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and AlphaMark Actively

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

The idea behind First Trust Income and AlphaMark Actively Managed 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.