Correlation Between Desjardins and First Trust
Can any of the company-specific risk be diversified away by investing in both Desjardins 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 Desjardins and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desjardins RI USA and First Trust Dow, you can compare the effects of market volatilities on Desjardins 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 Desjardins with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins and First Trust.
Diversification Opportunities for Desjardins and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Desjardins and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Desjardins 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 Desjardins RI USA 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 Dow has no effect on the direction of Desjardins i.e., Desjardins and First Trust go up and down completely randomly.
Pair Corralation between Desjardins and First Trust
Assuming the 90 days trading horizon Desjardins is expected to generate 1.44 times less return on investment than First Trust. But when comparing it to its historical volatility, Desjardins RI USA is 1.38 times less risky than First Trust. It trades about 0.05 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,869 in First Trust Dow on January 21, 2025 and sell it today you would earn a total of 522.00 from holding First Trust Dow or generate 27.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Desjardins RI USA vs. First Trust Dow
Performance |
| Timeline |
| Desjardins RI USA |
| First Trust Dow |
Desjardins and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Desjardins and First Trust
The main advantage of trading using opposite Desjardins and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desjardins 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.| Desjardins vs. Desjardins RI Canada | Desjardins vs. Global X Global | Desjardins vs. Desjardins RI Global | Desjardins vs. Desjardins Canadian Preferred |
| First Trust vs. First Trust NASDAQ | First Trust vs. Global X Industry | First Trust vs. First Trust NYSE | First Trust vs. Evolve Cloud Computing |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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