Correlation Between Communication Services and First Trust

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

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

Diversification Opportunities for Communication Services and First Trust

0.96

Correlation Coefficient

Communication Services  First Trust

Almost no diversification

The 3 months correlation between Communication and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Communication Services Select and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Communication Services 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 Communication Services Select 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 Mid has no effect on the direction of Communication Services i.e., Communication Services and First Trust go up and down completely randomly.

Pair Corralation between Communication Services and First Trust

Considering the 90-day investment horizon Communication Services Select is expected to generate 0.76 times more return on investment than First Trust. However, Communication Services Select is 1.31 times less risky than First Trust. It trades about 0.21 of its potential returns per unit of risk. First Trust Mid is currently generating about 0.16 per unit of risk. If you would invest  10,766  in Communication Services Select on July 3, 2025 and sell it today you would earn a total of  1,071  from holding Communication Services Select or generate 9.95% return on investment over 90 days.

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

Communication Services Select  vs.  First Trust Mid

Communication Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Communication Services may actually be approaching a critical reversion point that can send shares even higher in November 2025.

First Trust Mid

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mid are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Communication Services and First Trust

The main advantage of trading using opposite Communication Services and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Communication Services 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 Communication Services Select and First Trust Mid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.