Correlation Between Angel Oak and First Trust

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

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

Diversification Opportunities for Angel Oak and First Trust

-0.78

Correlation Coefficient

Angel Oak  First Trust

Pay attention - limited upside

The 3 months correlation between Angel and First is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak UltraShort and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Angel Oak 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 Angel Oak UltraShort 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 Dow has no effect on the direction of Angel Oak i.e., Angel Oak and First Trust go up and down completely randomly.

Pair Corralation between Angel Oak and First Trust

Given the investment horizon of 90 days Angel Oak UltraShort is expected to generate 0.02 times more return on investment than First Trust. However, Angel Oak UltraShort is 55.67 times less risky than First Trust. It trades about 0.44 of its potential returns per unit of risk. First Trust Dow is currently generating about -0.05 per unit of risk. If you would invest  5,041  in Angel Oak UltraShort on February 3, 2025 and sell it today you would earn a total of  62.00  from holding Angel Oak UltraShort or generate 1.23% return on investment over 90 days.

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

Angel Oak UltraShort  vs.  First Trust Dow

Angel Oak UltraShort

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak UltraShort are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Angel Oak is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Dow

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Dow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Angel Oak and First Trust

The main advantage of trading using opposite Angel Oak and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Angel Oak 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 Angel Oak UltraShort and First Trust Dow 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.