Correlation Between First Trust and AOT Growth
Can any of the company-specific risk be diversified away by investing in both First Trust and AOT Growth 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 First Trust and AOT Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and AOT Growth and, you can compare the effects of market volatilities on First Trust and AOT Growth 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 First Trust with a short position of AOT Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AOT Growth.
Diversification Opportunities for First Trust and AOT Growth
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and AOT is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and AOT Growth and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOT Growth and First Trust 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 First Trust NASDAQ are associated (or correlated) with AOT Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOT Growth has no effect on the direction of First Trust i.e., First Trust and AOT Growth go up and down completely randomly.
Pair Corralation between First Trust and AOT Growth
Given the investment horizon of 90 days First Trust is expected to generate 1.54 times less return on investment than AOT Growth. But when comparing it to its historical volatility, First Trust NASDAQ is 1.18 times less risky than AOT Growth. It trades about 0.09 of its potential returns per unit of risk. AOT Growth and is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,149 in AOT Growth and on August 26, 2024 and sell it today you would earn a total of 1,499 from holding AOT Growth and or generate 47.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. AOT Growth and
Performance |
| Timeline |
| First Trust NASDAQ |
| AOT Growth |
First Trust and AOT Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AOT Growth
The main advantage of trading using opposite First Trust and AOT Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AOT Growth 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 AOT Growth will offset losses from the drop in AOT Growth's long position.| First Trust vs. Amplify ETF Trust | First Trust vs. Global X Cybersecurity | First Trust vs. iShares Cybersecurity and | First Trust vs. First Trust Cloud |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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