Correlation Between First Trust and Strategy Shares

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

By analyzing existing cross correlation between First Trust TCW and Strategy Shares Gold Hedged, you can compare the effects of market volatilities on First Trust and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Strategy Shares.

Diversification Opportunities for First Trust and Strategy Shares

0.11

Correlation Coefficient

First Trust  Strategy Shares

Average diversification

The 3 months correlation between First and Strategy is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Strategy Shares Gold Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Gold 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 TCW are associated (or correlated) with Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Gold has no effect on the direction of First Trust i.e., First Trust and Strategy Shares go up and down completely randomly.

Pair Corralation between First Trust and Strategy Shares

Given the investment horizon of 90 days First Trust TCW is expected to generate 0.08 times more return on investment than Strategy Shares. However, First Trust TCW is 12.51 times less risky than Strategy Shares. It trades about 0.17 of its potential returns per unit of risk. Strategy Shares Gold Hedged is currently generating about 0.0 per unit of risk. If you would invest  2,448  in First Trust TCW on February 14, 2025 and sell it today you would earn a total of  14.50  from holding First Trust TCW or generate 0.59% return on investment over 90 days.

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

First Trust TCW  vs.  Strategy Shares Gold Hedged

First Trust TCW

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Strategy Shares Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares Gold Hedged are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Strategy Shares may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with First Trust and Strategy Shares

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

The idea behind First Trust TCW and Strategy Shares Gold Hedged 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.