Correlation Between First Trust and Koppers Holdings

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

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

Diversification Opportunities for First Trust and Koppers Holdings

0.27

Correlation Coefficient

First Trust  Koppers Holdings

Modest diversification

The 3 months correlation between First and Koppers is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Koppers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koppers Holdings 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 Dorsey are associated (or correlated) with Koppers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koppers Holdings has no effect on the direction of First Trust i.e., First Trust and Koppers Holdings go up and down completely randomly.

Pair Corralation between First Trust and Koppers Holdings

Given the investment horizon of 90 days First Trust Dorsey is expected to generate 0.33 times more return on investment than Koppers Holdings. However, First Trust Dorsey is 2.99 times less risky than Koppers Holdings. It trades about 0.24 of its potential returns per unit of risk. Koppers Holdings is currently generating about 0.01 per unit of risk. If you would invest  3,259  in First Trust Dorsey on September 1, 2024 and sell it today you would earn a total of  389.00  from holding First Trust Dorsey or generate 11.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

First Trust Dorsey  vs.  Koppers Holdings

First Trust Dorsey

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Koppers Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and Koppers Holdings

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

The idea behind First Trust Dorsey and Koppers Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.