Correlation Between South West and First Trust

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

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

Diversification Opportunities for South West and First Trust

-0.75

Correlation Coefficient

South West  First Trust

Pay attention - limited upside

The 3 months correlation between South and First is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding South West Pinnacle and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and South West 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 South West Pinnacle 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 Exchange has no effect on the direction of South West i.e., South West and First Trust go up and down completely randomly.

Pair Corralation between South West and First Trust

If you would invest  63,900  in First Trust Exchange Traded on February 4, 2024 and sell it today you would earn a total of  0.00  from holding First Trust Exchange Traded or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

South West Pinnacle  vs.  First Trust Exchange Traded

South West Pinnacle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South West Pinnacle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

First Trust Exchange

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with South West and First Trust

The main advantage of trading using opposite South West and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South West 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 South West Pinnacle and First Trust Exchange Traded 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.