Correlation Between First Trust and US Global

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

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

Diversification Opportunities for First Trust and US Global

-0.5

Correlation Coefficient

First Trust  US Global

Very good diversification

The 3 months correlation between First and SEA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust IndustrialsProduce and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 IndustrialsProducer are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of First Trust i.e., First Trust and US Global go up and down completely randomly.

Pair Corralation between First Trust and US Global

Considering the 90-day investment horizon First Trust IndustrialsProducer is expected to generate 0.87 times more return on investment than US Global. However, First Trust IndustrialsProducer is 1.15 times less risky than US Global. It trades about 0.24 of its potential returns per unit of risk. US Global Sea is currently generating about -0.09 per unit of risk. If you would invest  7,134  in First Trust IndustrialsProducer on September 2, 2024 and sell it today you would earn a total of  1,179  from holding First Trust IndustrialsProducer or generate 16.53% return on investment over 90 days.

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

First Trust IndustrialsProduce  vs.  US Global Sea

First Trust Industri

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust IndustrialsProducer are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, First Trust reported solid returns over the last few months and may actually be approaching a breakup point.

US Global Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with First Trust and US Global

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

The idea behind First Trust IndustrialsProducer and US Global Sea 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.