Correlation Between Freedom Day and FT Cboe

Can any of the company-specific risk be diversified away by investing in both Freedom Day and FT Cboe 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 Freedom Day and FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freedom Day Dividend and FT Cboe Vest, you can compare the effects of market volatilities on Freedom Day and FT Cboe 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 Freedom Day with a short position of FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and FT Cboe.

Diversification Opportunities for Freedom Day and FT Cboe

0.8

Correlation Coefficient

Freedom Day  FT Cboe

Very poor diversification

The 3 months correlation between Freedom and RDVI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Freedom Day i.e., Freedom Day and FT Cboe go up and down completely randomly.

Pair Corralation between Freedom Day and FT Cboe

Given the investment horizon of 90 days Freedom Day is expected to generate 4.98 times less return on investment than FT Cboe. But when comparing it to its historical volatility, Freedom Day Dividend is 1.49 times less risky than FT Cboe. It trades about 0.03 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,357  in FT Cboe Vest on September 15, 2024 and sell it today you would earn a total of  156.00  from holding FT Cboe Vest or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Freedom Day Dividend  vs.  FT Cboe Vest

Freedom Day Dividend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FT Cboe Vest

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, FT Cboe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Freedom Day and FT Cboe

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

The idea behind Freedom Day Dividend and FT Cboe Vest 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..