Correlation Between First Trust and Amplify Online

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

By analyzing existing cross correlation between First Trust LongShort and Amplify Online Retail, you can compare the effects of market volatilities on First Trust and Amplify Online 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 Amplify Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Amplify Online.

Diversification Opportunities for First Trust and Amplify Online

0.64

Correlation Coefficient

First Trust  Amplify Online

Poor diversification

The 3 months correlation between First and Amplify is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and Amplify Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify Online Retail 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 LongShort are associated (or correlated) with Amplify Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify Online Retail has no effect on the direction of First Trust i.e., First Trust and Amplify Online go up and down completely randomly.

Pair Corralation between First Trust and Amplify Online

Given the investment horizon of 90 days First Trust is expected to generate 1.06 times less return on investment than Amplify Online. But when comparing it to its historical volatility, First Trust LongShort is 2.56 times less risky than Amplify Online. It trades about 0.08 of its potential returns per unit of risk. Amplify Online Retail is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,410  in Amplify Online Retail on March 19, 2024 and sell it today you would earn a total of  1,061  from holding Amplify Online Retail or generate 24.06% return on investment over 90 days.

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

First Trust LongShort  vs.  Amplify Online Retail

First Trust LongShort

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, First Trust is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Amplify Online Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amplify Online Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Amplify Online is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Amplify Online

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

The idea behind First Trust LongShort and Amplify Online Retail 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.