Correlation Between Barclays ETN and First Trust
Can any of the company-specific risk be diversified away by investing in both Barclays ETN 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 Barclays ETN and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays ETN Select and First Trust North, you can compare the effects of market volatilities on Barclays ETN 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 Barclays ETN with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays ETN and First Trust.
Diversification Opportunities for Barclays ETN and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Barclays and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and First Trust North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust North and Barclays ETN 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 Barclays ETN Select 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 North has no effect on the direction of Barclays ETN i.e., Barclays ETN and First Trust go up and down completely randomly.
Pair Corralation between Barclays ETN and First Trust
Given the investment horizon of 90 days Barclays ETN Select is expected to generate 1.15 times more return on investment than First Trust. However, Barclays ETN is 1.15 times more volatile than First Trust North. It trades about 0.13 of its potential returns per unit of risk. First Trust North is currently generating about 0.11 per unit of risk. If you would invest 1,756 in Barclays ETN Select on October 23, 2024 and sell it today you would earn a total of 1,358 from holding Barclays ETN Select or generate 77.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barclays ETN Select vs. First Trust North
Performance |
| Timeline |
| Barclays ETN Select |
| First Trust North |
Barclays ETN and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barclays ETN and First Trust
The main advantage of trading using opposite Barclays ETN and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN 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.| Barclays ETN vs. Alerian Energy Infrastructure | Barclays ETN vs. UBS AG London | Barclays ETN vs. First Trust North | Barclays ETN vs. Tortoise North American |
| First Trust vs. Global X MLP | First Trust vs. Global X MLP | First Trust vs. First Trust Energy | First Trust vs. First Trust Preferred |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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