Correlation Between Fresh Del and First Trust

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

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

Diversification Opportunities for Fresh Del and First Trust

0.2

Correlation Coefficient

Fresh Del  First Trust

Modest diversification

The 3 months correlation between Fresh and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Fresh Del 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 Fresh Del Monte 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 Dow has no effect on the direction of Fresh Del i.e., Fresh Del and First Trust go up and down completely randomly.

Pair Corralation between Fresh Del and First Trust

Considering the 90-day investment horizon Fresh Del is expected to generate 5.03 times less return on investment than First Trust. In addition to that, Fresh Del is 1.07 times more volatile than First Trust Dow. It trades about 0.01 of its total potential returns per unit of risk. First Trust Dow is currently generating about 0.08 per unit of volatility. If you would invest  12,883  in First Trust Dow on January 24, 2024 and sell it today you would earn a total of  6,556  from holding First Trust Dow or generate 50.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fresh Del Monte  vs.  First Trust Dow

Fresh Del Monte

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Fresh Del is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Dow

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fresh Del and First Trust

The main advantage of trading using opposite Fresh Del and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte and First Trust Dow 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..