Correlation Between Xtrackers California and First Trust
Can any of the company-specific risk be diversified away by investing in both Xtrackers California 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 Xtrackers California and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers California Municipal and First Trust Flexible, you can compare the effects of market volatilities on Xtrackers California 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 Xtrackers California with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and First Trust.
Diversification Opportunities for Xtrackers California and First Trust
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Xtrackers and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and First Trust Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Flexible and Xtrackers California 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 Xtrackers California Municipal 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 Flexible has no effect on the direction of Xtrackers California i.e., Xtrackers California and First Trust go up and down completely randomly.
Pair Corralation between Xtrackers California and First Trust
Allowing for the 90-day total investment horizon Xtrackers California Municipal is expected to generate 0.26 times more return on investment than First Trust. However, Xtrackers California Municipal is 3.78 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Flexible is currently generating about 0.02 per unit of risk. If you would invest 2,500 in Xtrackers California Municipal on August 29, 2024 and sell it today you would earn a total of 42.00 from holding Xtrackers California Municipal or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers California Municipal vs. First Trust Flexible
Performance |
| Timeline |
| Xtrackers California |
| First Trust Flexible |
Xtrackers California and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers California and First Trust
The main advantage of trading using opposite Xtrackers California and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California 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.| Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. ALPS Intermediate Municipal | Xtrackers California vs. MYMF |
| First Trust vs. Fundamental Income Net | First Trust vs. TTM Technologies | First Trust vs. DXP Enterprises | First Trust vs. Citi Trends |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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