Correlation Between First Trust and Aptus Defined

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

By analyzing existing cross correlation between First Trust Multi Asset and Aptus Defined Risk, you can compare the effects of market volatilities on First Trust and Aptus Defined 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 Aptus Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Aptus Defined.

Diversification Opportunities for First Trust and Aptus Defined

0.87

Correlation Coefficient

First Trust  Aptus Defined

Very poor diversification

The 3 months correlation between First and Aptus is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and Aptus Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Defined Risk 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 Multi Asset are associated (or correlated) with Aptus Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Defined Risk has no effect on the direction of First Trust i.e., First Trust and Aptus Defined go up and down completely randomly.

Pair Corralation between First Trust and Aptus Defined

Given the investment horizon of 90 days First Trust Multi Asset is expected to generate 1.24 times more return on investment than Aptus Defined. However, First Trust is 1.24 times more volatile than Aptus Defined Risk. It trades about -0.01 of its potential returns per unit of risk. Aptus Defined Risk is currently generating about -0.28 per unit of risk. If you would invest  1,560  in First Trust Multi Asset on January 23, 2024 and sell it today you would lose (3.00) from holding First Trust Multi Asset or give up 0.19% of portfolio value over 90 days.

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

First Trust Multi Asset  vs.  Aptus Defined Risk

First Trust Multi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aptus Defined Risk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Defined Risk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Aptus Defined is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and Aptus Defined

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

The idea behind First Trust Multi Asset and Aptus Defined Risk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.