Correlation Between First Trust and Regents Park

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Can any of the company-specific risk be diversified away by investing in both First Trust and Regents Park 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 Regents Park 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 Regents Park Hedged, you can compare the effects of market volatilities on First Trust and Regents Park 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 Regents Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Regents Park.

Diversification Opportunities for First Trust and Regents Park

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between First and Regents is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and Regents Park Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regents Park Hedged 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 Regents Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regents Park Hedged has no effect on the direction of First Trust i.e., First Trust and Regents Park go up and down completely randomly.

Pair Corralation between First Trust and Regents Park

Given the investment horizon of 90 days First Trust is expected to generate 2.52 times less return on investment than Regents Park. But when comparing it to its historical volatility, First Trust Multi Asset is 1.15 times less risky than Regents Park. It trades about 0.19 of its potential returns per unit of risk. Regents Park Hedged is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Regents Park Hedged on July 14, 2024 and sell it today you would earn a total of  38.00  from holding Regents Park Hedged or generate 3.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

First Trust Multi Asset  vs.  Regents Park Hedged

 Performance 
       Timeline  
First Trust Multi 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 11 (%) 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.
Regents Park Hedged 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Regents Park Hedged are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Regents Park is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust and Regents Park Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Regents Park

The main advantage of trading using opposite First Trust and Regents Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Regents Park 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 Regents Park will offset losses from the drop in Regents Park's long position.
The idea behind First Trust Multi Asset and Regents Park Hedged 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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