Correlation Between Abrdn Bloomberg and First Trust

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

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

Diversification Opportunities for Abrdn Bloomberg and First Trust

0.85

Correlation Coefficient

Abrdn Bloomberg  First Trust

Very poor diversification

The 3 months correlation between Abrdn and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding abrdn Bloomberg All and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and Abrdn Bloomberg 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 abrdn Bloomberg All 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 Global has no effect on the direction of Abrdn Bloomberg i.e., Abrdn Bloomberg and First Trust go up and down completely randomly.

Pair Corralation between Abrdn Bloomberg and First Trust

Considering the 90-day investment horizon abrdn Bloomberg All is expected to generate 0.97 times more return on investment than First Trust. However, abrdn Bloomberg All is 1.03 times less risky than First Trust. It trades about -0.03 of its potential returns per unit of risk. First Trust Global is currently generating about -0.04 per unit of risk. If you would invest  2,079  in abrdn Bloomberg All on February 1, 2025 and sell it today you would lose (40.00) from holding abrdn Bloomberg All or give up 1.92% of portfolio value over 90 days.

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

abrdn Bloomberg All  vs.  First Trust Global

abrdn Bloomberg All

Risk-Adjusted Performance

Very Weak

Over the last 90 days abrdn Bloomberg All has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Abrdn Bloomberg is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Abrdn Bloomberg and First Trust

The main advantage of trading using opposite Abrdn Bloomberg and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abrdn Bloomberg 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 abrdn Bloomberg All and First Trust Global 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.