Correlation Between WisdomTree Interest and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Interest 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 WisdomTree Interest and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Interest Rate and First Trust Senior, you can compare the effects of market volatilities on WisdomTree Interest 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 WisdomTree Interest with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Interest and First Trust.
Diversification Opportunities for WisdomTree Interest and First Trust
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Interest Rate and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and WisdomTree Interest 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 WisdomTree Interest Rate 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 Senior has no effect on the direction of WisdomTree Interest i.e., WisdomTree Interest and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Interest and First Trust
Given the investment horizon of 90 days WisdomTree Interest Rate is expected to generate 1.47 times more return on investment than First Trust. However, WisdomTree Interest is 1.47 times more volatile than First Trust Senior. It trades about 0.19 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.14 per unit of risk. If you would invest 2,220 in WisdomTree Interest Rate on August 28, 2024 and sell it today you would earn a total of 22.00 from holding WisdomTree Interest Rate or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Interest Rate vs. First Trust Senior
Performance |
| Timeline |
| WisdomTree Interest Rate |
| First Trust Senior |
WisdomTree Interest and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Interest and First Trust
The main advantage of trading using opposite WisdomTree Interest and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Interest 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 WisdomTree Interest Rate and First Trust Senior 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 Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |