Correlation Between Aptus Collared and First Trust

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

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

Diversification Opportunities for Aptus Collared and First Trust

0.98

Correlation Coefficient

Aptus Collared  First Trust

Almost no diversification

The 3 months correlation between Aptus and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Aptus Collared Income and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Aptus Collared 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 Aptus Collared Income 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 Exchange has no effect on the direction of Aptus Collared i.e., Aptus Collared and First Trust go up and down completely randomly.

Pair Corralation between Aptus Collared and First Trust

Given the investment horizon of 90 days Aptus Collared is expected to generate 1.05 times less return on investment than First Trust. In addition to that, Aptus Collared is 1.08 times more volatile than First Trust Exchange Traded. It trades about 0.12 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.14 per unit of volatility. If you would invest  3,107  in First Trust Exchange Traded on July 6, 2024 and sell it today you would earn a total of  1,353  from holding First Trust Exchange Traded or generate 43.55% return on investment over 90 days.

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

Aptus Collared Income  vs.  First Trust Exchange Traded

Aptus Collared Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptus Collared Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Aptus Collared is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First Trust Exchange

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aptus Collared and First Trust

The main advantage of trading using opposite Aptus Collared and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptus Collared 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 Aptus Collared Income and First Trust Exchange Traded 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.

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 the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.