Correlation Between First Trust and RPAR Risk
Can any of the company-specific risk be diversified away by investing in both First Trust and RPAR Risk 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 RPAR Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SkyBridge and RPAR Risk Parity, you can compare the effects of market volatilities on First Trust and RPAR Risk 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 RPAR Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and RPAR Risk.
Diversification Opportunities for First Trust and RPAR Risk
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and RPAR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and RPAR Risk Parity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPAR Risk Parity 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 SkyBridge are associated (or correlated) with RPAR Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPAR Risk Parity has no effect on the direction of First Trust i.e., First Trust and RPAR Risk go up and down completely randomly.
Pair Corralation between First Trust and RPAR Risk
Given the investment horizon of 90 days First Trust SkyBridge is expected to generate 6.73 times more return on investment than RPAR Risk. However, First Trust is 6.73 times more volatile than RPAR Risk Parity. It trades about 0.09 of its potential returns per unit of risk. RPAR Risk Parity is currently generating about 0.03 per unit of risk. If you would invest 713.00 in First Trust SkyBridge on August 26, 2024 and sell it today you would earn a total of 1,277 from holding First Trust SkyBridge or generate 179.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SkyBridge vs. RPAR Risk Parity
Performance |
| Timeline |
| First Trust SkyBridge |
| RPAR Risk Parity |
First Trust and RPAR Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and RPAR Risk
The main advantage of trading using opposite First Trust and RPAR Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, RPAR Risk 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 RPAR Risk will offset losses from the drop in RPAR Risk's long position.| First Trust vs. VanEck Digital Transformation | First Trust vs. Bitwise Crypto Industry | First Trust vs. Global X Blockchain | First Trust vs. First Trust Indxx |
| RPAR Risk vs. iShares ESG Aware | RPAR Risk vs. iShares ESG Aware | RPAR Risk vs. iShares ESG Advanced | RPAR Risk vs. iShares Interest Rate |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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