Correlation Between EA Series and First Trust
Can any of the company-specific risk be diversified away by investing in both EA Series 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 EA Series and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EA Series Trust and First Trust Alternative, you can compare the effects of market volatilities on EA Series 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 EA Series with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and First Trust.
Diversification Opportunities for EA Series and First Trust
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between DRAI and First is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and EA Series 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 EA Series 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 Alternative has no effect on the direction of EA Series i.e., EA Series and First Trust go up and down completely randomly.
Pair Corralation between EA Series and First Trust
Given the investment horizon of 90 days EA Series Trust is expected to under-perform the First Trust. In addition to that, EA Series is 1.1 times more volatile than First Trust Alternative. It trades about -0.08 of its total potential returns per unit of risk. First Trust Alternative is currently generating about 0.06 per unit of volatility. If you would invest 2,779 in First Trust Alternative on August 30, 2024 and sell it today you would earn a total of 24.00 from holding First Trust Alternative or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EA Series Trust vs. First Trust Alternative
Performance |
| Timeline |
| EA Series Trust |
| First Trust Alternative |
EA Series and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EA Series and First Trust
The main advantage of trading using opposite EA Series and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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.| EA Series vs. Vanguard Total Stock | EA Series vs. SPDR SP 500 | EA Series vs. iShares Core SP | EA Series vs. Vanguard Total Bond |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust SSI | First Trust vs. First Trust Indxx |
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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