Correlation Between Macquariefirst and First Trust

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

By analyzing existing cross correlation between Macquariefirst Tr Global and First Trust Senior, you can compare the effects of market volatilities on Macquariefirst and First Trust 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 Macquariefirst with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquariefirst and First Trust.

Diversification Opportunities for Macquariefirst and First Trust

0.74

Correlation Coefficient

Macquariefirst  First Trust

Poor diversification

The 3 months correlation between Macquariefirst and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Macquariefirst Tr Global and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Macquariefirst 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 Macquariefirst Tr Global are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Macquariefirst i.e., Macquariefirst and First Trust go up and down completely randomly.

Pair Corralation between Macquariefirst and First Trust

Considering the 90-day investment horizon Macquariefirst is expected to generate 2.23 times less return on investment than First Trust. In addition to that, Macquariefirst is 1.79 times more volatile than First Trust Senior. It trades about 0.02 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.09 per unit of volatility. If you would invest  1,016  in First Trust Senior on August 31, 2024 and sell it today you would earn a total of  28.00  from holding First Trust Senior or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	23.44%
Values	Daily Returns

Macquariefirst Tr Global  vs.  First Trust Senior

Macquariefirst Tr Global

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Macquariefirst Tr Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Macquariefirst is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Senior

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 6 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Macquariefirst and First Trust

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

The idea behind Macquariefirst Tr Global and First Trust Senior 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.