Correlation Between First Trust and Maj Invest

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

Diversification Opportunities for First Trust and Maj Invest

-0.53

Correlation Coefficient

First Trust  Maj Invest

Excellent diversification

The 3 months correlation between First and Maj is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Maj Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest 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 Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest has no effect on the direction of First Trust i.e., First Trust and Maj Invest go up and down completely randomly.

Pair Corralation between First Trust and Maj Invest

Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the Maj Invest. In addition to that, First Trust is 4.56 times more volatile than Maj Invest . It trades about -0.19 of its total potential returns per unit of risk. Maj Invest is currently generating about 0.01 per unit of volatility. If you would invest  20,177  in Maj Invest on January 20, 2024 and sell it today you would earn a total of  15.00  from holding Maj Invest or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

First Trust NASDAQ  vs.  Maj Invest

First Trust NASDAQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's essential indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Maj Invest

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maj Invest are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Maj Invest 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 Maj Invest

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

The idea behind First Trust NASDAQ and Maj Invest 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.