Correlation Between First Trust and Arbitrage Event
Can any of the company-specific risk be diversified away by investing in both First Trust and Arbitrage Event 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 Arbitrage Event into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Merger and The Arbitrage Event Driven, you can compare the effects of market volatilities on First Trust and Arbitrage Event 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 Arbitrage Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Arbitrage Event.
Diversification Opportunities for First Trust and Arbitrage Event
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Arbitrage is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Merger and The Arbitrage Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Event 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 Merger are associated (or correlated) with Arbitrage Event. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Event has no effect on the direction of First Trust i.e., First Trust and Arbitrage Event go up and down completely randomly.
Pair Corralation between First Trust and Arbitrage Event
Assuming the 90 days horizon First Trust is expected to generate 7.48 times less return on investment than Arbitrage Event. But when comparing it to its historical volatility, First Trust Merger is 1.18 times less risky than Arbitrage Event. It trades about 0.07 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 1,206 in The Arbitrage Event Driven on May 31, 2025 and sell it today you would earn a total of 34.00 from holding The Arbitrage Event Driven or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Merger vs. The Arbitrage Event Driven
Performance |
| Timeline |
| First Trust Merger |
| Arbitrage Event |
First Trust and Arbitrage Event Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Arbitrage Event
The main advantage of trading using opposite First Trust and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Arbitrage Event 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 Arbitrage Event will offset losses from the drop in Arbitrage Event's long position.| First Trust vs. First Trust Managed | First Trust vs. Franklin Templeton Multi Asset | First Trust vs. First Trust Multi Strategy | First Trust vs. First Trust Short |
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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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.
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