Correlation Between First Trust and Evolve E

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

By analyzing existing cross correlation between First Trust Nasdaq and Evolve E Gaming Index, you can compare the effects of market volatilities on First Trust and Evolve E 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 Evolve E. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Evolve E.

Diversification Opportunities for First Trust and Evolve E

0.84

Correlation Coefficient

First Trust  Evolve E

Very poor diversification

The 3 months correlation between First and Evolve is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Evolve E Gaming Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve E Gaming 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 Nasdaq are associated (or correlated) with Evolve E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve E Gaming has no effect on the direction of First Trust i.e., First Trust and Evolve E go up and down completely randomly.

Pair Corralation between First Trust and Evolve E

Assuming the 90 days trading horizon First Trust Nasdaq is expected to generate 2.3 times more return on investment than Evolve E. However, First Trust is 2.3 times more volatile than Evolve E Gaming Index. It trades about 0.25 of its potential returns per unit of risk. Evolve E Gaming Index is currently generating about 0.37 per unit of risk. If you would invest  1,196  in First Trust Nasdaq on April 23, 2025 and sell it today you would earn a total of  410.00  from holding First Trust Nasdaq or generate 34.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

First Trust Nasdaq  vs.  Evolve E Gaming Index

First Trust Nasdaq

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 19 (%) 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.

Evolve E Gaming

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve E Gaming Index are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Evolve E displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Evolve E

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

The idea behind First Trust Nasdaq and Evolve E Gaming Index 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.