Correlation Between Dimensional ETF and First Trust
Can any of the company-specific risk be diversified away by investing in both Dimensional ETF 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 Dimensional ETF and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional ETF Trust and First Trust Ultra, you can compare the effects of market volatilities on Dimensional ETF 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 Dimensional ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional ETF and First Trust.
Diversification Opportunities for Dimensional ETF and First Trust
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dimensional and First is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and First Trust Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Ultra and Dimensional ETF 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 Dimensional ETF Trust 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 Ultra has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and First Trust go up and down completely randomly.
Pair Corralation between Dimensional ETF and First Trust
Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the First Trust. In addition to that, Dimensional ETF is 2.6 times more volatile than First Trust Ultra. It trades about -0.1 of its total potential returns per unit of risk. First Trust Ultra is currently generating about -0.05 per unit of volatility. If you would invest 2,008 in First Trust Ultra on August 26, 2024 and sell it today you would lose (2.00) from holding First Trust Ultra or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional ETF Trust vs. First Trust Ultra
Performance |
| Timeline |
| Dimensional ETF Trust |
| First Trust Ultra |
Dimensional ETF and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional ETF and First Trust
The main advantage of trading using opposite Dimensional ETF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF 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.| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Core Equity |
| First Trust vs. Dimensional ETF Trust | First Trust vs. Dimensional ETF Trust | First Trust vs. Dimensional ETF Trust | First Trust vs. Dimensional Emerging Core |
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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