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 Cboe, 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
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Desjardins and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe 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 Cboe 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 RI USA is expected to generate 3.82 times more return on investment than First Trust. However, Desjardins is 3.82 times more volatile than First Trust Cboe. It trades about 0.24 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.31 per unit of risk. If you would invest 4,304 in Desjardins RI USA on August 29, 2024 and sell it today you would earn a total of 213.00 from holding Desjardins RI USA or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Desjardins RI USA vs. First Trust Cboe
Performance |
| Timeline |
| Desjardins RI USA |
| First Trust Cboe |
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. iShares SPTSX 60 | First Trust vs. iShares Core SP | First Trust vs. iShares Core SPTSX | First Trust vs. BMO Aggregate Bond |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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