Correlation Between First Trust and DWAQ

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

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

Diversification Opportunities for First Trust and DWAQ

0.0

Correlation Coefficient

First Trust  DWAQ

Pay attention - limited upside

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

Pair Corralation between First Trust and DWAQ

If you would invest (100.00) in DWAQ on January 30, 2024 and sell it today you would earn a total of  100.00  from holding DWAQ or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Trust Multi  vs.  DWAQ

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 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DWAQ

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and DWAQ

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

The idea behind First Trust Multi and DWAQ 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.