Correlation Between Olo and First Trust
Can any of the company-specific risk be diversified away by investing in both Olo 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 Olo and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olo Inc and First Trust Nasdaq, you can compare the effects of market volatilities on Olo 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 Olo with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olo and First Trust.
Diversification Opportunities for Olo and First Trust
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Olo and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Olo Inc and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Olo 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 Olo Inc 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 Nasdaq has no effect on the direction of Olo i.e., Olo and First Trust go up and down completely randomly.
Pair Corralation between Olo and First Trust
Considering the 90-day investment horizon Olo Inc is expected to generate 1.88 times more return on investment than First Trust. However, Olo is 1.88 times more volatile than First Trust Nasdaq. It trades about -0.13 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about -0.28 per unit of risk. If you would invest 526.00 in Olo Inc on January 25, 2024 and sell it today you would lose (34.00) from holding Olo Inc or give up 6.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Olo Inc vs. First Trust Nasdaq
Performance |
| Timeline |
| Olo Inc |
| First Trust Nasdaq |
Olo and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olo and First Trust
The main advantage of trading using opposite Olo and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olo 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 Olo Inc and First Trust Nasdaq 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.| First Trust vs. iShares Robotics and | First Trust vs. Robo Global Robotics | First Trust vs. Robo Global Artificial | First Trust vs. Global X Robotics |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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