Correlation Between Boeing and First Trust
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and First Trust Nasdaq, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and First Trust.
Diversification Opportunities for Boeing and First Trust
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Boeing and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Boeing 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 The Boeing 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 Nasdaq has no effect on the direction of Boeing i.e., Boeing and First Trust go up and down completely randomly.
Pair Corralation between Boeing and First Trust
Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the First Trust. In addition to that, Boeing is 1.36 times more volatile than First Trust Nasdaq. It trades about -0.01 of its total potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.04 per unit of volatility. If you would invest 2,566 in First Trust Nasdaq on August 27, 2024 and sell it today you would earn a total of 671.00 from holding First Trust Nasdaq or generate 26.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. First Trust Nasdaq
Performance |
| Timeline |
| Boeing |
| First Trust Nasdaq |
Boeing and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and First Trust
The main advantage of trading using opposite Boeing and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing and First Trust Nasdaq 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 Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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