Correlation Between First Trust and Sdit Short

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

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

Diversification Opportunities for First Trust and Sdit Short

0.95

Correlation Coefficient

First Trust  Sdit Short

Almost no diversification

The 3 months correlation between First and Sdit is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and Sdit Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sdit Short Duration 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 Preferred are associated (or correlated) with Sdit Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sdit Short Duration has no effect on the direction of First Trust i.e., First Trust and Sdit Short go up and down completely randomly.

Pair Corralation between First Trust and Sdit Short

Assuming the 90 days horizon First Trust Preferred is expected to generate 1.13 times more return on investment than Sdit Short. However, First Trust is 1.13 times more volatile than Sdit Short Duration. It trades about 0.52 of its potential returns per unit of risk. Sdit Short Duration is currently generating about 0.18 per unit of risk. If you would invest  1,935  in First Trust Preferred on May 28, 2025 and sell it today you would earn a total of  87.00  from holding First Trust Preferred or generate 4.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

First Trust Preferred  vs.  Sdit Short Duration

First Trust Preferred

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Preferred are ranked lower than 40 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sdit Short Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sdit Short Duration are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sdit Short 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 Sdit Short

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

The idea behind First Trust Preferred and Sdit Short Duration 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.