Correlation Between First Trust and Gabelli Multimedia

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

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

Diversification Opportunities for First Trust and Gabelli Multimedia

-0.08

Correlation Coefficient

First Trust  Gabelli Multimedia

Good diversification

The 3 months correlation between First and Gabelli is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and The Gabelli Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Multimedia 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 Senior are associated (or correlated) with Gabelli Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Multimedia has no effect on the direction of First Trust i.e., First Trust and Gabelli Multimedia go up and down completely randomly.

Pair Corralation between First Trust and Gabelli Multimedia

Considering the 90-day investment horizon First Trust Senior is expected to generate 0.69 times more return on investment than Gabelli Multimedia. However, First Trust Senior is 1.45 times less risky than Gabelli Multimedia. It trades about 0.05 of its potential returns per unit of risk. The Gabelli Multimedia is currently generating about -0.1 per unit of risk. If you would invest  1,020  in First Trust Senior on September 4, 2024 and sell it today you would earn a total of  12.00  from holding First Trust Senior or generate 1.18% return on investment over 90 days.

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

First Trust Senior  vs.  The Gabelli Multimedia

First Trust Senior

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

The Gabelli Multimedia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Multimedia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Gabelli Multimedia

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

The idea behind First Trust Senior and The Gabelli Multimedia 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.