Correlation Between Morgan Creek and First Trust
Can any of the company-specific risk be diversified away by investing in both Morgan Creek 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 Morgan Creek and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Creek Capital and First Trust Mid, you can compare the effects of market volatilities on Morgan Creek 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 Morgan Creek with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Creek and First Trust.
Diversification Opportunities for Morgan Creek and First Trust
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Morgan and First is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Creek Capital and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Morgan Creek 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 Morgan Creek Capital 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 Mid has no effect on the direction of Morgan Creek i.e., Morgan Creek and First Trust go up and down completely randomly.
Pair Corralation between Morgan Creek and First Trust
Considering the 90-day investment horizon Morgan Creek is expected to generate 2.81 times less return on investment than First Trust. But when comparing it to its historical volatility, Morgan Creek Capital is 1.11 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust Mid is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,594 in First Trust Mid on September 12, 2024 and sell it today you would earn a total of 2,917 from holding First Trust Mid or generate 52.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 15.76% |
| Values | Daily Returns |
Morgan Creek Capital vs. First Trust Mid
Performance |
| Timeline |
| Morgan Creek Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust Mid |
Morgan Creek and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Creek and First Trust
The main advantage of trading using opposite Morgan Creek and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Creek 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.| Morgan Creek vs. Vanguard Mid Cap Growth | Morgan Creek vs. Vanguard Small Cap Value | Morgan Creek vs. Vanguard Mid Cap Value | Morgan Creek vs. Vanguard Growth Index |
| First Trust vs. Vanguard Mid Cap Growth | First Trust vs. iShares Russell Mid Cap | First Trust vs. ARK Innovation ETF | First Trust vs. iShares SP Mid Cap |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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