Correlation Between Astor Star and First Trust

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

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

Diversification Opportunities for Astor Star and First Trust

0.75

Correlation Coefficient

Astor Star  First Trust

Poor diversification

The 3 months correlation between Astor and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Astor Star Fund and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Astor Star 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 Astor Star Fund 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 Short has no effect on the direction of Astor Star i.e., Astor Star and First Trust go up and down completely randomly.

Pair Corralation between Astor Star and First Trust

Assuming the 90 days horizon Astor Star Fund is expected to generate 2.88 times more return on investment than First Trust. However, Astor Star is 2.88 times more volatile than First Trust Short. It trades about 0.18 of its potential returns per unit of risk. First Trust Short is currently generating about 0.27 per unit of risk. If you would invest  1,542  in Astor Star Fund on May 20, 2025 and sell it today you would earn a total of  72.00  from holding Astor Star Fund or generate 4.67% return on investment over 90 days.

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

Astor Star Fund  vs.  First Trust Short

Astor Star Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astor Star Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Astor Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Short

Risk-Adjusted Performance

Solid

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

Pair Trading with Astor Star and First Trust

The main advantage of trading using opposite Astor Star and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astor Star 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 Astor Star Fund and First Trust Short 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.