Correlation Between First Trust and AOI Electronics

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

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

Diversification Opportunities for First Trust and AOI Electronics

-0.06

Correlation Coefficient

First Trust  AOI Electronics

Good diversification

The 3 months correlation between First and AOI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and AOI Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOI Electronics and First Trust 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 First Trust NASDAQ are associated (or correlated) with AOI Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOI Electronics has no effect on the direction of First Trust i.e., First Trust and AOI Electronics go up and down completely randomly.

Pair Corralation between First Trust and AOI Electronics

If you would invest  6,979  in First Trust NASDAQ on February 28, 2024 and sell it today you would earn a total of  338.00  from holding First Trust NASDAQ or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.12%
Values	Daily Returns

First Trust NASDAQ  vs.  AOI Electronics Co

First Trust NASDAQ

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AOI Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AOI Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with First Trust and AOI Electronics

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

The idea behind First Trust NASDAQ and AOI Electronics Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.