Correlation Between First Trust and Advisors Inner

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

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

Diversification Opportunities for First Trust and Advisors Inner

0.06

Correlation Coefficient

First Trust  Advisors Inner

Significant diversification

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

Pair Corralation between First Trust and Advisors Inner

Allowing for the 90-day total investment horizon First Trust is expected to generate 110.33 times less return on investment than Advisors Inner. But when comparing it to its historical volatility, First Trust Dorsey is 138.7 times less risky than Advisors Inner. It trades about 0.19 of its potential returns per unit of risk. The Advisors Inner is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.00  in The Advisors Inner on September 4, 2024 and sell it today you would earn a total of  2,462  from holding The Advisors Inner or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.75%
Values	Daily Returns

First Trust Dorsey  vs.  The Advisors Inner

First Trust Dorsey

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Advisors Inner

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Advisors Inner are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical and fundamental indicators, Advisors Inner demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Advisors Inner

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

The idea behind First Trust Dorsey and The Advisors Inner 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.