Correlation Between First Trust and Rationalpier

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

By analyzing existing cross correlation between First Trust Short and Rationalpier 88 Convertible, you can compare the effects of market volatilities on First Trust and Rationalpier 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 Rationalpier. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Rationalpier.

Diversification Opportunities for First Trust and Rationalpier

0.8

Correlation Coefficient

First Trust  Rationalpier

Very poor diversification

The 3 months correlation between First and Rationalpier is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Short and Rationalpier 88 Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rationalpier 88 Conv 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 Short are associated (or correlated) with Rationalpier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rationalpier 88 Conv has no effect on the direction of First Trust i.e., First Trust and Rationalpier go up and down completely randomly.

Pair Corralation between First Trust and Rationalpier

Assuming the 90 days horizon First Trust Short is expected to generate 0.33 times more return on investment than Rationalpier. However, First Trust Short is 3.03 times less risky than Rationalpier. It trades about 0.22 of its potential returns per unit of risk. Rationalpier 88 Convertible is currently generating about 0.07 per unit of risk. If you would invest  1,772  in First Trust Short on May 12, 2025 and sell it today you would earn a total of  33.00  from holding First Trust Short or generate 1.86% return on investment over 90 days.

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

First Trust Short  vs.  Rationalpier 88 Convertible

First Trust Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rationalpier 88 Conv

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Rationalpier 88 Convertible are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rationalpier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Rationalpier

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

The idea behind First Trust Short and Rationalpier 88 Convertible 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.