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 Nasdaq, 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
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Principal and First is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Principal 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 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 Nasdaq 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 2.03 times more return on investment than First Trust. However, Principal is 2.03 times more volatile than First Trust Nasdaq. It trades about 0.03 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.02 per unit of risk. If you would invest 3,294 in Principal on August 30, 2024 and sell it today you would earn a total of 655.00 from holding Principal or generate 19.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 83.64% |
| Values | Daily Returns |
Principal vs. First Trust Nasdaq
Performance |
| Timeline |
| Principal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust Nasdaq |
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. iShares Genomics Immunology | Principal vs. Loncar Cancer Immunotherapy | Principal vs. Virtus LifeSci Biotech | Principal vs. Invesco DWA Healthcare |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Indxx |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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