Correlation Between Defiance Daily and First Trust

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

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

Diversification Opportunities for Defiance Daily and First Trust

0.91

Correlation Coefficient

Defiance Daily  First Trust

Almost no diversification

The 3 months correlation between Defiance and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Daily Target and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and Defiance Daily 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 Defiance Daily Target 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 Enhanced has no effect on the direction of Defiance Daily i.e., Defiance Daily and First Trust go up and down completely randomly.

Pair Corralation between Defiance Daily and First Trust

Given the investment horizon of 90 days Defiance Daily Target is expected to generate 6.98 times more return on investment than First Trust. However, Defiance Daily is 6.98 times more volatile than First Trust Enhanced. It trades about 0.38 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.26 per unit of risk. If you would invest  1,232  in Defiance Daily Target on April 30, 2025 and sell it today you would earn a total of  2,372  from holding Defiance Daily Target or generate 192.53% return on investment over 90 days.

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

Defiance Daily Target  vs.  First Trust Enhanced

Defiance Daily Target

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Daily Target are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Defiance Daily showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Defiance Daily and First Trust

The main advantage of trading using opposite Defiance Daily and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defiance Daily 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 Defiance Daily Target and First Trust Enhanced 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.