Correlation Between First Trust and ETRACS IFED
Can any of the company-specific risk be diversified away by investing in both First Trust and ETRACS IFED 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 ETRACS IFED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and ETRACS IFED Invest, you can compare the effects of market volatilities on First Trust and ETRACS IFED 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 ETRACS IFED. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ETRACS IFED.
Diversification Opportunities for First Trust and ETRACS IFED
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and ETRACS is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and ETRACS IFED Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS IFED Invest 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 Exchange Traded are associated (or correlated) with ETRACS IFED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS IFED Invest has no effect on the direction of First Trust i.e., First Trust and ETRACS IFED go up and down completely randomly.
Pair Corralation between First Trust and ETRACS IFED
Given the investment horizon of 90 days First Trust is expected to generate 7.78 times less return on investment than ETRACS IFED. But when comparing it to its historical volatility, First Trust Exchange Traded is 5.25 times less risky than ETRACS IFED. It trades about 0.25 of its potential returns per unit of risk. ETRACS IFED Invest is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,905 in ETRACS IFED Invest on August 26, 2024 and sell it today you would earn a total of 358.00 from holding ETRACS IFED Invest or generate 9.17% 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 Exchange Traded vs. ETRACS IFED Invest
Performance |
| Timeline |
| First Trust Exchange |
| ETRACS IFED Invest |
First Trust and ETRACS IFED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ETRACS IFED
The main advantage of trading using opposite First Trust and ETRACS IFED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ETRACS IFED 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 ETRACS IFED will offset losses from the drop in ETRACS IFED's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| ETRACS IFED vs. FT Vest Equity | ETRACS IFED vs. Northern Lights | ETRACS IFED vs. Dimensional International High | ETRACS IFED vs. First Trust Exchange Traded |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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