Correlation Between First Trust and IMGP DBi

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

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

Diversification Opportunities for First Trust and IMGP DBi

-0.15

Correlation Coefficient

First Trust  IMGP DBi

Good diversification

The 3 months correlation between First and IMGP is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and iMGP DBi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iMGP DBi Managed 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 Managed are associated (or correlated) with IMGP DBi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iMGP DBi Managed has no effect on the direction of First Trust i.e., First Trust and IMGP DBi go up and down completely randomly.

Pair Corralation between First Trust and IMGP DBi

Considering the 90-day investment horizon First Trust Managed is expected to generate 1.16 times more return on investment than IMGP DBi. However, First Trust is 1.16 times more volatile than iMGP DBi Managed. It trades about 0.12 of its potential returns per unit of risk. iMGP DBi Managed is currently generating about -0.05 per unit of risk. If you would invest  4,686  in First Trust Managed on September 1, 2024 and sell it today you would earn a total of  183.00  from holding First Trust Managed or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

First Trust Managed  vs.  iMGP DBi Managed

First Trust Managed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iMGP DBi Managed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and IMGP DBi

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

The idea behind First Trust Managed and iMGP DBi 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.