Correlation Between First Trust and WBI BullBear
Can any of the company-specific risk be diversified away by investing in both First Trust and WBI BullBear 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 WBI BullBear 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 WBI BullBear Quality, you can compare the effects of market volatilities on First Trust and WBI BullBear 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 WBI BullBear. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WBI BullBear.
Diversification Opportunities for First Trust and WBI BullBear
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and WBI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and WBI BullBear Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Quality 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Quality has no effect on the direction of First Trust i.e., First Trust and WBI BullBear go up and down completely randomly.
Pair Corralation between First Trust and WBI BullBear
Given the investment horizon of 90 days First Trust is expected to generate 1.43 times less return on investment than WBI BullBear. But when comparing it to its historical volatility, First Trust Exchange Traded is 2.18 times less risky than WBI BullBear. It trades about 0.14 of its potential returns per unit of risk. WBI BullBear Quality is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,858 in WBI BullBear Quality on September 2, 2024 and sell it today you would earn a total of 849.00 from holding WBI BullBear Quality or generate 29.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. WBI BullBear Quality
Performance |
| Timeline |
| First Trust Exchange |
| WBI BullBear Quality |
First Trust and WBI BullBear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WBI BullBear
The main advantage of trading using opposite First Trust and WBI BullBear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WBI BullBear 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 WBI BullBear will offset losses from the drop in WBI BullBear'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 |
| WBI BullBear vs. FT Vest Equity | WBI BullBear vs. Northern Lights | WBI BullBear vs. Dimensional International High | WBI BullBear vs. Matthews China Discovery |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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