Correlation Between First Trust and RiverFront Strategic
Can any of the company-specific risk be diversified away by investing in both First Trust and RiverFront Strategic 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 RiverFront Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust TCW and RiverFront Strategic Income, you can compare the effects of market volatilities on First Trust and RiverFront Strategic 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 RiverFront Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and RiverFront Strategic.
Diversification Opportunities for First Trust and RiverFront Strategic
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and RiverFront is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and RiverFront Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Strategic 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 TCW are associated (or correlated) with RiverFront Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Strategic has no effect on the direction of First Trust i.e., First Trust and RiverFront Strategic go up and down completely randomly.
Pair Corralation between First Trust and RiverFront Strategic
Given the investment horizon of 90 days First Trust TCW is expected to generate 1.0 times more return on investment than RiverFront Strategic. However, First Trust is 1.0 times more volatile than RiverFront Strategic Income. It trades about 0.09 of its potential returns per unit of risk. RiverFront Strategic Income is currently generating about 0.08 per unit of risk. If you would invest 2,007 in First Trust TCW on September 1, 2024 and sell it today you would earn a total of 107.00 from holding First Trust TCW or generate 5.33% 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 TCW vs. RiverFront Strategic Income
Performance |
| Timeline |
| First Trust TCW |
| RiverFront Strategic |
First Trust and RiverFront Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and RiverFront Strategic
The main advantage of trading using opposite First Trust and RiverFront Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, RiverFront Strategic 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 RiverFront Strategic will offset losses from the drop in RiverFront Strategic's long position.| First Trust vs. First Trust TCW | First Trust vs. First Trust TCW | First Trust vs. First Trust Ultra | First Trust vs. First Trust Short |
| RiverFront Strategic vs. FlexShares Ready Access | RiverFront Strategic vs. RiverFront Dynamic Core | RiverFront Strategic vs. Invesco Global Short | RiverFront Strategic vs. RiverFront Dynamic Dividend |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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