Correlation Between Apple and First Trust
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and First Trust Exchange Traded, you can compare the effects of market volatilities on Apple 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 Apple with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and First Trust.
Diversification Opportunities for Apple and First Trust
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Apple and First is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Apple 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 Apple Inc 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 Exchange has no effect on the direction of Apple i.e., Apple and First Trust go up and down completely randomly.
Pair Corralation between Apple and First Trust
Given the investment horizon of 90 days Apple Inc is expected to generate 5.95 times more return on investment than First Trust. However, Apple is 5.95 times more volatile than First Trust Exchange Traded. It trades about 0.05 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.04 per unit of risk. If you would invest 19,080 in Apple Inc on October 24, 2024 and sell it today you would earn a total of 3,173 from holding Apple Inc or generate 16.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Apple Inc vs. First Trust Exchange Traded
Performance |
| Timeline |
| Apple Inc |
| First Trust Exchange |
Apple and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and First Trust
The main advantage of trading using opposite Apple and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and First Trust Exchange Traded 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.| First Trust vs. First Trust Ultra | First Trust vs. First Trust Short | First Trust vs. First Trust Municipal | First Trust vs. First Trust Managed |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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