Correlation Between Themes Small and FT Vest

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

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

Diversification Opportunities for Themes Small and FT Vest

-0.1

Correlation Coefficient

Themes Small  FT Vest

Good diversification

The 3 months correlation between Themes and DHDG is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Themes Small Cap and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and Themes Small 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 Themes Small Cap are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Themes Small i.e., Themes Small and FT Vest go up and down completely randomly.

Pair Corralation between Themes Small and FT Vest

Given the investment horizon of 90 days Themes Small Cap is expected to generate 4.04 times more return on investment than FT Vest. However, Themes Small is 4.04 times more volatile than FT Vest Equity. It trades about 0.31 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.41 per unit of risk. If you would invest  3,074  in Themes Small Cap on September 5, 2024 and sell it today you would earn a total of  319.00  from holding Themes Small Cap or generate 10.38% return on investment over 90 days.

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

Themes Small Cap  vs.  FT Vest Equity

Themes Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Small Cap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Themes Small reported solid returns over the last few months and may actually be approaching a breakup point.

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Themes Small and FT Vest

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

The idea behind Themes Small Cap and FT Vest Equity 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.