Correlation Between InfraCap MLP and First Trust
Can any of the company-specific risk be diversified away by investing in both InfraCap MLP 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 InfraCap MLP and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InfraCap MLP ETF and First Trust Large, you can compare the effects of market volatilities on InfraCap MLP 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 InfraCap MLP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of InfraCap MLP and First Trust.
Diversification Opportunities for InfraCap MLP and First Trust
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InfraCap and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and InfraCap MLP 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 InfraCap MLP ETF 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 Large has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and First Trust go up and down completely randomly.
Pair Corralation between InfraCap MLP and First Trust
Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 1.15 times more return on investment than First Trust. However, InfraCap MLP is 1.15 times more volatile than First Trust Large. It trades about 0.56 of its potential returns per unit of risk. First Trust Large is currently generating about 0.21 per unit of risk. If you would invest 3,972 in InfraCap MLP ETF on August 27, 2024 and sell it today you would earn a total of 573.00 from holding InfraCap MLP ETF or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InfraCap MLP ETF vs. First Trust Large
Performance |
| Timeline |
| InfraCap MLP ETF |
| First Trust Large |
InfraCap MLP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InfraCap MLP and First Trust
The main advantage of trading using opposite InfraCap MLP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InfraCap MLP 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.| InfraCap MLP vs. Virtus InfraCap Preferred | InfraCap MLP vs. Global X MLP | InfraCap MLP vs. Amplify High Income | InfraCap MLP vs. Alerian MLP ETF |
| First Trust vs. First Trust Large | First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Mid |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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