Correlation Between SWP Growth and First Trust

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

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

Diversification Opportunities for SWP Growth and First Trust

0.92

Correlation Coefficient

SWP Growth  First Trust

Almost no diversification

The 3 months correlation between SWP and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SWP Growth Income and First Trust Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Emerging and SWP Growth 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 SWP Growth Income 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 Emerging has no effect on the direction of SWP Growth i.e., SWP Growth and First Trust go up and down completely randomly.

Pair Corralation between SWP Growth and First Trust

Considering the 90-day investment horizon SWP Growth Income is expected to generate 1.24 times more return on investment than First Trust. However, SWP Growth is 1.24 times more volatile than First Trust Emerging. It trades about 0.35 of its potential returns per unit of risk. First Trust Emerging is currently generating about 0.15 per unit of risk. If you would invest  2,370  in SWP Growth Income on April 29, 2025 and sell it today you would earn a total of  344.40  from holding SWP Growth Income or generate 14.53% return on investment over 90 days.

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

SWP Growth Income  vs.  First Trust Emerging

SWP Growth Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, SWP Growth reported solid returns over the last few months and may actually be approaching a breakup point.

First Trust Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Emerging are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SWP Growth and First Trust

The main advantage of trading using opposite SWP Growth and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWP Growth 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 SWP Growth Income and First Trust Emerging 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.