Correlation Between First Trust and Professionally Managed

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

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

Diversification Opportunities for First Trust and Professionally Managed

0.71

Correlation Coefficient

First Trust  Professionally Managed

Poor diversification

The 3 months correlation between First and Professionally is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed 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 SMID are associated (or correlated) with Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of First Trust i.e., First Trust and Professionally Managed go up and down completely randomly.

Pair Corralation between First Trust and Professionally Managed

Given the investment horizon of 90 days First Trust is expected to generate 2.58 times less return on investment than Professionally Managed. In addition to that, First Trust is 1.11 times more volatile than Professionally Managed Portfolios. It trades about 0.08 of its total potential returns per unit of risk. Professionally Managed Portfolios is currently generating about 0.23 per unit of volatility. If you would invest  2,400  in Professionally Managed Portfolios on May 7, 2025 and sell it today you would earn a total of  314.00  from holding Professionally Managed Portfolios or generate 13.08% return on investment over 90 days.

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

First Trust SMID  vs.  Professionally Managed Portfol

First Trust SMID

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SMID are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Professionally Managed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Professionally Managed Portfolios are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Professionally Managed unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Professionally Managed

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

The idea behind First Trust SMID and Professionally Managed Portfolios 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.