Correlation Between Abrdn Physical and First Trust

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

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

Diversification Opportunities for Abrdn Physical and First Trust

0.86

Correlation Coefficient

Abrdn Physical  First Trust

Very poor diversification

The 3 months correlation between Abrdn and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding abrdn Physical Palladium 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 Abrdn Physical 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 abrdn Physical Palladium 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 Abrdn Physical i.e., Abrdn Physical and First Trust go up and down completely randomly.

Pair Corralation between Abrdn Physical and First Trust

Given the investment horizon of 90 days abrdn Physical Palladium is expected to generate 1.65 times more return on investment than First Trust. However, Abrdn Physical is 1.65 times more volatile than First Trust Nasdaq. It trades about 0.23 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.26 per unit of risk. If you would invest  8,582  in abrdn Physical Palladium on April 25, 2025 and sell it today you would earn a total of  2,884  from holding abrdn Physical Palladium or generate 33.61% return on investment over 90 days.

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

abrdn Physical Palladium  vs.  First Trust Nasdaq

abrdn Physical Palladium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in abrdn Physical Palladium are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Abrdn Physical disclosed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Nasdaq

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abrdn Physical and First Trust

The main advantage of trading using opposite Abrdn Physical and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abrdn Physical 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 abrdn Physical Palladium 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.