Correlation Between First Trust and IA Clarington

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

By analyzing existing cross correlation between First Trust Indxx and IA Clarington Loomis, you can compare the effects of market volatilities on First Trust and IA Clarington 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 IA Clarington. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IA Clarington.

Diversification Opportunities for First Trust and IA Clarington

0.89

Correlation Coefficient

First Trust  IA Clarington

Very poor diversification

The 3 months correlation between First and IGAF is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and IA Clarington Loomis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Loomis 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 Indxx are associated (or correlated) with IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Loomis has no effect on the direction of First Trust i.e., First Trust and IA Clarington go up and down completely randomly.

Pair Corralation between First Trust and IA Clarington

Assuming the 90 days trading horizon First Trust Indxx is expected to generate 1.66 times more return on investment than IA Clarington. However, First Trust is 1.66 times more volatile than IA Clarington Loomis. It trades about 0.22 of its potential returns per unit of risk. IA Clarington Loomis is currently generating about 0.19 per unit of risk. If you would invest  1,098  in First Trust Indxx on April 21, 2025 and sell it today you would earn a total of  203.00  from holding First Trust Indxx or generate 18.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

First Trust Indxx  vs.  IA Clarington Loomis

First Trust Indxx

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

IA Clarington Loomis

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IA Clarington Loomis are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IA Clarington may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with First Trust and IA Clarington

The main advantage of trading using opposite First Trust and IA Clarington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IA Clarington 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 IA Clarington will offset losses from the drop in IA Clarington's long position.

The idea behind First Trust Indxx and IA Clarington Loomis 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.