Correlation Between Global X and First Trust

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

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

Diversification Opportunities for Global X and First Trust

0.28

Correlation Coefficient

Global X  First Trust

Modest diversification

The 3 months correlation between Global and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Global X SuperIncome and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront and Global X 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 Global X SuperIncome 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 RiverFront has no effect on the direction of Global X i.e., Global X and First Trust go up and down completely randomly.

Pair Corralation between Global X and First Trust

Given the investment horizon of 90 days Global X SuperIncome is expected to generate 0.51 times more return on investment than First Trust. However, Global X SuperIncome is 1.97 times less risky than First Trust. It trades about -0.1 of its potential returns per unit of risk. First Trust RiverFront is currently generating about -0.08 per unit of risk. If you would invest  969.00  in Global X SuperIncome on September 24, 2024 and sell it today you would lose (30.00) from holding Global X SuperIncome or give up 3.1% of portfolio value over 90 days.

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

Global X SuperIncome  vs.  First Trust RiverFront

Global X SuperIncome

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X SuperIncome has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust RiverFront

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust RiverFront has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and First Trust

The main advantage of trading using opposite Global X and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X SuperIncome and First Trust RiverFront 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.