Correlation Between Brompton North and First Trust
Can any of the company-specific risk be diversified away by investing in both Brompton North 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 Brompton North and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton North American and First Trust Dow, you can compare the effects of market volatilities on Brompton North 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 Brompton North with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton North and First Trust.
Diversification Opportunities for Brompton North and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brompton and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Brompton North American and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Brompton North 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 Brompton North American 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 Dow has no effect on the direction of Brompton North i.e., Brompton North and First Trust go up and down completely randomly.
Pair Corralation between Brompton North and First Trust
Assuming the 90 days trading horizon Brompton North American is expected to generate 1.41 times more return on investment than First Trust. However, Brompton North is 1.41 times more volatile than First Trust Dow. It trades about 0.28 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.33 per unit of risk. If you would invest 2,359 in Brompton North American on September 2, 2024 and sell it today you would earn a total of 268.00 from holding Brompton North American or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton North American vs. First Trust Dow
Performance |
| Timeline |
| Brompton North American |
| First Trust Dow |
Brompton North and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton North and First Trust
The main advantage of trading using opposite Brompton North and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton North 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.| Brompton North vs. BMO Canadian Dividend | Brompton North vs. BMO Covered Call | Brompton North vs. BMO Canadian High | Brompton North vs. BMO NASDAQ 100 |
| First Trust vs. First Trust NASDAQ | First Trust vs. First Trust Cloud | First Trust vs. Global X Industry | First Trust vs. First Trust NYSE |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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