Correlation Between Principal and First Trust
Can any of the company-specific risk be diversified away by investing in both Principal 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 Principal and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal and First Trust NYSE, you can compare the effects of market volatilities on Principal 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 Principal with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal and First Trust.
Diversification Opportunities for Principal and First Trust
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Principal and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Principal and First Trust NYSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NYSE and Principal 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 Principal 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 NYSE has no effect on the direction of Principal i.e., Principal and First Trust go up and down completely randomly.
Pair Corralation between Principal and First Trust
Given the investment horizon of 90 days Principal is expected to generate 1.52 times more return on investment than First Trust. However, Principal is 1.52 times more volatile than First Trust NYSE. It trades about 0.03 of its potential returns per unit of risk. First Trust NYSE is currently generating about 0.02 per unit of risk. If you would invest 3,307 in Principal on August 27, 2024 and sell it today you would earn a total of 642.00 from holding Principal or generate 19.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 84.07% |
| Values | Daily Returns |
Principal vs. First Trust NYSE
Performance |
| Timeline |
| Principal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust NYSE |
Principal and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal and First Trust
The main advantage of trading using opposite Principal and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal 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.| Principal vs. Global X Clean | Principal vs. Global X Renewable | Principal vs. Global X Thematic | Principal vs. Global X AgTech |
| First Trust vs. Global X Clean | First Trust vs. Global X Renewable | First Trust vs. Global X Thematic | First Trust vs. Global X AgTech |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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