Correlation Between First Trust and JPN

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Can any of the company-specific risk be diversified away by investing in both First Trust and JPN 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 JPN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and JPN, you can compare the effects of market volatilities on First Trust and JPN 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 JPN. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and JPN.

Diversification Opportunities for First Trust and JPN

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between First and JPN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and JPN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPN 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 Japan are associated (or correlated) with JPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPN has no effect on the direction of First Trust i.e., First Trust and JPN go up and down completely randomly.

Pair Corralation between First Trust and JPN

If you would invest (100.00) in JPN on January 20, 2024 and sell it today you would earn a total of  100.00  from holding JPN or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

First Trust Japan  vs.  JPN

 Performance 
       Timeline  
First Trust Japan 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days First Trust Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
JPN 

Risk-Adjusted Performance

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

First Trust and JPN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and JPN

The main advantage of trading using opposite First Trust and JPN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, JPN 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 JPN will offset losses from the drop in JPN's long position.
The idea behind First Trust Japan and JPN 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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