Correlation Between Bridge Builder and First Trust
Can any of the company-specific risk be diversified away by investing in both Bridge Builder 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 Bridge Builder and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridge Builder E and First Trust Specialty, you can compare the effects of market volatilities on Bridge Builder 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 Bridge Builder with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridge Builder and First Trust.
Diversification Opportunities for Bridge Builder and First Trust
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bridge and First is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bridge Builder E and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty and Bridge Builder 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 Bridge Builder E 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 Specialty has no effect on the direction of Bridge Builder i.e., Bridge Builder and First Trust go up and down completely randomly.
Pair Corralation between Bridge Builder and First Trust
Assuming the 90 days horizon Bridge Builder is expected to generate 1.91 times less return on investment than First Trust. But when comparing it to its historical volatility, Bridge Builder E is 4.1 times less risky than First Trust. It trades about 0.17 of its potential returns per unit of risk. First Trust Specialty is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 440.00 in First Trust Specialty on November 27, 2024 and sell it today you would earn a total of 8.00 from holding First Trust Specialty or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridge Builder E vs. First Trust Specialty
Performance |
| Timeline |
| Bridge Builder E |
| First Trust Specialty |
Bridge Builder and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridge Builder and First Trust
The main advantage of trading using opposite Bridge Builder and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridge Builder 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.| Bridge Builder vs. Prudential Core Conservative | Bridge Builder vs. Manning Napier Diversified | Bridge Builder vs. Guidepath Conservative Income | Bridge Builder vs. Delaware Limited Term Diversified |
| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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