Correlation Between FT Cboe and Freedom Day

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

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

Diversification Opportunities for FT Cboe and Freedom Day

0.8

Correlation Coefficient

FT Cboe  Freedom Day

Very poor diversification

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

Pair Corralation between FT Cboe and Freedom Day

Given the investment horizon of 90 days FT Cboe Vest is expected to generate 1.49 times more return on investment than Freedom Day. However, FT Cboe is 1.49 times more volatile than Freedom Day Dividend. It trades about 0.1 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.03 per unit of risk. 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

FT Cboe Vest  vs.  Freedom Day Dividend

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.

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.

Pair Trading with FT Cboe and Freedom Day

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

The idea behind FT Cboe Vest and Freedom Day Dividend 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.