Correlation Between First Trust and Barclays Capital

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

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

Diversification Opportunities for First Trust and Barclays Capital

-0.62

Correlation Coefficient

First Trust  Barclays Capital

Excellent diversification

The 3 months correlation between First and Barclays is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Exchange Traded are associated (or correlated) with Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of First Trust i.e., First Trust and Barclays Capital go up and down completely randomly.

Pair Corralation between First Trust and Barclays Capital

If you would invest  2,733  in First Trust Exchange Traded on September 22, 2024 and sell it today you would earn a total of  87.00  from holding First Trust Exchange Traded or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	2.27%
Values	Daily Returns

First Trust Exchange Traded  vs.  Barclays Capital

First Trust Exchange

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barclays Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barclays Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Barclays Capital

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

The idea behind First Trust Exchange Traded and Barclays Capital 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.