Correlation Between Quadratic Deflation and First Trust
Can any of the company-specific risk be diversified away by investing in both Quadratic Deflation 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 Quadratic Deflation and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quadratic Deflation ETF and First Trust Long, you can compare the effects of market volatilities on Quadratic Deflation 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 Quadratic Deflation with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quadratic Deflation and First Trust.
Diversification Opportunities for Quadratic Deflation and First Trust
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Quadratic and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Deflation ETF and First Trust Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Long and Quadratic Deflation 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 Quadratic Deflation 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 Long has no effect on the direction of Quadratic Deflation i.e., Quadratic Deflation and First Trust go up and down completely randomly.
Pair Corralation between Quadratic Deflation and First Trust
Given the investment horizon of 90 days Quadratic Deflation ETF is expected to generate 1.74 times more return on investment than First Trust. However, Quadratic Deflation is 1.74 times more volatile than First Trust Long. It trades about 0.07 of its potential returns per unit of risk. First Trust Long is currently generating about 0.04 per unit of risk. If you would invest 1,396 in Quadratic Deflation ETF on August 30, 2024 and sell it today you would earn a total of 23.00 from holding Quadratic Deflation ETF or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quadratic Deflation ETF vs. First Trust Long
Performance |
| Timeline |
| Quadratic Deflation ETF |
| First Trust Long |
Quadratic Deflation and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quadratic Deflation and First Trust
The main advantage of trading using opposite Quadratic Deflation and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quadratic Deflation 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.| Quadratic Deflation vs. SPDR Barclays Short | Quadratic Deflation vs. SPDR Portfolio Intermediate | Quadratic Deflation vs. SPDR Barclays Long | Quadratic Deflation vs. SPDR Barclays Intermediate |
| First Trust vs. SPDR Barclays Short | First Trust vs. SPDR Portfolio Intermediate | First Trust vs. SPDR Barclays Long | First Trust vs. SPDR Barclays Intermediate |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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