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 Exchange Traded, 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
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DRLL and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 Exchange 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 1.47 times more volatile than First Trust Exchange Traded. It trades about -0.16 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about -0.12 per unit of volatility. If you would invest 2,059 in First Trust Exchange Traded on January 15, 2025 and sell it today you would lose (142.30) from holding First Trust Exchange Traded or give up 6.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EA Series Trust vs. First Trust Exchange Traded
Performance |
| Timeline |
| EA Series Trust |
| First Trust Exchange |
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. EA Series Trust | ||
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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