Correlation Between First Trust and Silicon Laboratories

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

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

Diversification Opportunities for First Trust and Silicon Laboratories

0.74

Correlation Coefficient

First Trust  Silicon Laboratories

Poor diversification

The 3 months correlation between First and Silicon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Flexible and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Flexible are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of First Trust i.e., First Trust and Silicon Laboratories go up and down completely randomly.

Pair Corralation between First Trust and Silicon Laboratories

Given the investment horizon of 90 days First Trust Flexible is expected to generate 0.24 times more return on investment than Silicon Laboratories. However, First Trust Flexible is 4.13 times less risky than Silicon Laboratories. It trades about -0.06 of its potential returns per unit of risk. Silicon Laboratories is currently generating about -0.15 per unit of risk. If you would invest  1,685  in First Trust Flexible on January 22, 2025 and sell it today you would lose (67.00) from holding First Trust Flexible or give up 3.98% of portfolio value over 90 days.

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

First Trust Flexible  vs.  Silicon Laboratories

First Trust Flexible

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Flexible has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Silicon Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicon Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Trust and Silicon Laboratories

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

The idea behind First Trust Flexible and Silicon Laboratories 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.