Correlation Between Advisors Capital and First Trust

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

Diversification Opportunities for Advisors Capital and First Trust

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Advisors and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Advisors Capital Tactical and First Trust SSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SSI and Advisors Capital 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 Advisors Capital Tactical 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 SSI has no effect on the direction of Advisors Capital i.e., Advisors Capital and First Trust go up and down completely randomly.

Pair Corralation between Advisors Capital and First Trust

Assuming the 90 days horizon Advisors Capital Tactical is expected to generate 0.46 times more return on investment than First Trust. However, Advisors Capital Tactical is 2.19 times less risky than First Trust. It trades about 0.04 of its potential returns per unit of risk. First Trust SSI is currently generating about 0.02 per unit of risk. If you would invest  909.00  in Advisors Capital Tactical on September 3, 2022 and sell it today you would earn a total of  8.00  from holding Advisors Capital Tactical or generate 0.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Advisors Capital Tactical  vs.  First Trust SSI

 Performance (%) 
       Timeline  
Advisors Capital Tactical 
Advisors Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Advisors Capital Tactical are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Advisors Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Advisors Price Channel

First Trust SSI 
First Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SSI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Price Channel

Advisors Capital and First Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advisors Capital and First Trust

The main advantage of trading using opposite Advisors Capital and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advisors Capital 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.
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The idea behind Advisors Capital Tactical and First Trust SSI 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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Check out your portfolio center. 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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