Correlation Between EA Series and FT Vest

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

By analyzing existing cross correlation between EA Series Trust and FT Vest Equity, you can compare the effects of market volatilities on EA Series and FT Vest 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 EA Series with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and FT Vest.

Diversification Opportunities for EA Series and FT Vest

-0.06

Correlation Coefficient

EA Series  FT Vest

Good diversification

The 3 months correlation between MDLV and DHDG is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and EA Series 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 EA Series Trust are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of EA Series i.e., EA Series and FT Vest go up and down completely randomly.

Pair Corralation between EA Series and FT Vest

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the FT Vest. In addition to that, EA Series is 1.2 times more volatile than FT Vest Equity. It trades about -0.16 of its total potential returns per unit of risk. FT Vest Equity is currently generating about 0.07 per unit of volatility. If you would invest  3,044  in FT Vest Equity on August 23, 2024 and sell it today you would earn a total of  20.00  from holding FT Vest Equity or generate 0.66% return on investment over 90 days.

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

EA Series Trust  vs.  FT Vest Equity

EA Series Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, EA Series is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FT Vest Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EA Series and FT Vest

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

The idea behind EA Series Trust and FT Vest Equity 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.