Correlation Between First Trust and Cabana Target
Can any of the company-specific risk be diversified away by investing in both First Trust and Cabana Target 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 Cabana Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Cabana Target Drawdown, you can compare the effects of market volatilities on First Trust and Cabana Target 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 Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Cabana Target.
Diversification Opportunities for First Trust and Cabana Target
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Cabana is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Cabana Target Drawdown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Drawdown 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 Dorsey are associated (or correlated) with Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Drawdown has no effect on the direction of First Trust i.e., First Trust and Cabana Target go up and down completely randomly.
Pair Corralation between First Trust and Cabana Target
Given the investment horizon of 90 days First Trust Dorsey is expected to generate 3.39 times more return on investment than Cabana Target. However, First Trust is 3.39 times more volatile than Cabana Target Drawdown. It trades about 0.03 of its potential returns per unit of risk. Cabana Target Drawdown is currently generating about 0.08 per unit of risk. If you would invest 2,421 in First Trust Dorsey on November 9, 2024 and sell it today you would earn a total of 308.00 from holding First Trust Dorsey or generate 12.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. Cabana Target Drawdown
Performance |
| Timeline |
| First Trust Dorsey |
| Cabana Target Drawdown |
First Trust and Cabana Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Cabana Target
The main advantage of trading using opposite First Trust and Cabana Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Cabana Target 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 Cabana Target will offset losses from the drop in Cabana Target's long position.| First Trust vs. Freedom Day Dividend | First Trust vs. Franklin Templeton ETF | First Trust vs. iShares MSCI China | First Trust vs. Tidal Trust II |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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