Correlation Between First Trust and Soundwatch Hedged
Can any of the company-specific risk be diversified away by investing in both First Trust and Soundwatch Hedged 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 Soundwatch Hedged 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 Soundwatch Hedged Equity, you can compare the effects of market volatilities on First Trust and Soundwatch Hedged 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 Soundwatch Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Soundwatch Hedged.
Diversification Opportunities for First Trust and Soundwatch Hedged
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and Soundwatch is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Soundwatch Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soundwatch Hedged Equity 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 Soundwatch Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soundwatch Hedged Equity has no effect on the direction of First Trust i.e., First Trust and Soundwatch Hedged go up and down completely randomly.
Pair Corralation between First Trust and Soundwatch Hedged
Given the investment horizon of 90 days First Trust is expected to generate 1.45 times less return on investment than Soundwatch Hedged. But when comparing it to its historical volatility, First Trust Exchange Traded is 1.72 times less risky than Soundwatch Hedged. It trades about 0.14 of its potential returns per unit of risk. Soundwatch Hedged Equity is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,111 in Soundwatch Hedged Equity on August 30, 2024 and sell it today you would earn a total of 875.00 from holding Soundwatch Hedged Equity or generate 41.45% 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. Soundwatch Hedged Equity
Performance |
| Timeline |
| First Trust Exchange |
| Soundwatch Hedged Equity |
First Trust and Soundwatch Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Soundwatch Hedged
The main advantage of trading using opposite First Trust and Soundwatch Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Soundwatch Hedged 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 Soundwatch Hedged will offset losses from the drop in Soundwatch Hedged's long position.| First Trust vs. ABIVAX Socit Anonyme | First Trust vs. Pinnacle Sherman Multi Strategy | First Trust vs. Morningstar Unconstrained Allocation | First Trust vs. SPACE |
| Soundwatch Hedged vs. FT Vest Equity | Soundwatch Hedged vs. Northern Lights | Soundwatch Hedged vs. Dimensional International High | Soundwatch Hedged 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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