Correlation Between First Trust and Absolute Capital
Can any of the company-specific risk be diversified away by investing in both First Trust and Absolute Capital 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 First Trust and Absolute Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Short and Absolute Capital Defender, you can compare the effects of market volatilities on First Trust and Absolute Capital 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 First Trust with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Absolute Capital.
Diversification Opportunities for First Trust and Absolute Capital
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Absolute is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Short and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and First Trust 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 First Trust Short are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of First Trust i.e., First Trust and Absolute Capital go up and down completely randomly.
Pair Corralation between First Trust and Absolute Capital
Assuming the 90 days horizon First Trust Short is expected to generate 0.17 times more return on investment than Absolute Capital. However, First Trust Short is 5.91 times less risky than Absolute Capital. It trades about 0.31 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about -0.07 per unit of risk. If you would invest 1,797 in First Trust Short on September 25, 2025 and sell it today you would earn a total of 14.00 from holding First Trust Short or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Short vs. Absolute Capital Defender
Performance |
| Timeline |
| First Trust Short |
| Absolute Capital Defender |
First Trust and Absolute Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Absolute Capital
The main advantage of trading using opposite First Trust and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.| First Trust vs. Vanguard Financials Index | First Trust vs. 1919 Financial Services | First Trust vs. Rmb Mendon Financial | First Trust vs. Angel Oak Financial |
| Absolute Capital vs. Invesco Energy Fund | Absolute Capital vs. Blackrock All Cap Energy | Absolute Capital vs. Ivy Natural Resources | Absolute Capital vs. Franklin Natural Resources |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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