Correlation Between Thrivent High and First Trust

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

By analyzing existing cross correlation between Thrivent High Yield and First Trust NYSE, you can compare the effects of market volatilities on Thrivent High and First Trust 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 Thrivent High with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent High and First Trust.

Diversification Opportunities for Thrivent High and First Trust

0.69

Correlation Coefficient

Thrivent High  First Trust

Poor diversification

The 3 months correlation between Thrivent and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and First Trust NYSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NYSE and Thrivent High 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 Thrivent High Yield are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NYSE has no effect on the direction of Thrivent High i.e., Thrivent High and First Trust go up and down completely randomly.

Pair Corralation between Thrivent High and First Trust

Assuming the 90 days horizon Thrivent High is expected to generate 3.23 times less return on investment than First Trust. But when comparing it to its historical volatility, Thrivent High Yield is 4.39 times less risky than First Trust. It trades about 0.18 of its potential returns per unit of risk. First Trust NYSE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14,843  in First Trust NYSE on August 2, 2024 and sell it today you would earn a total of  2,298  from holding First Trust NYSE or generate 15.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Thrivent High Yield  vs.  First Trust NYSE

Thrivent High Yield

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust NYSE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NYSE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, First Trust is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thrivent High and First Trust

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

The idea behind Thrivent High Yield and First Trust NYSE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.