Correlation Between Opal International and First Trust

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

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

Diversification Opportunities for Opal International and First Trust

-0.2

Correlation Coefficient

Opal International  First Trust

Good diversification

The 3 months correlation between Opal and First is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Opal International Dividend and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Opal International 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 Opal International Dividend 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 Nasdaq has no effect on the direction of Opal International i.e., Opal International and First Trust go up and down completely randomly.

Pair Corralation between Opal International and First Trust

Given the investment horizon of 90 days Opal International Dividend is expected to generate 0.66 times more return on investment than First Trust. However, Opal International Dividend is 1.52 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about -0.03 per unit of risk. If you would invest  2,787  in Opal International Dividend on May 5, 2025 and sell it today you would earn a total of  59.00  from holding Opal International Dividend or generate 2.12% return on investment over 90 days.

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

Opal International Dividend  vs.  First Trust Nasdaq

Opal International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Opal International Dividend are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Opal International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Trust Nasdaq

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Opal International and First Trust

The main advantage of trading using opposite Opal International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opal International 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 Opal International Dividend and First Trust Nasdaq 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.