Correlation Between Discipline Fund and First Trust
Can any of the company-specific risk be diversified away by investing in both Discipline Fund 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 Discipline Fund and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discipline Fund ETF and First Trust Multi Asset, you can compare the effects of market volatilities on Discipline Fund 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 Discipline Fund with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discipline Fund and First Trust.
Diversification Opportunities for Discipline Fund and First Trust
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discipline and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Discipline Fund ETF and First Trust Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and Discipline Fund 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 Discipline Fund ETF 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 Multi has no effect on the direction of Discipline Fund i.e., Discipline Fund and First Trust go up and down completely randomly.
Pair Corralation between Discipline Fund and First Trust
Given the investment horizon of 90 days Discipline Fund is expected to generate 1.66 times less return on investment than First Trust. But when comparing it to its historical volatility, Discipline Fund ETF is 1.25 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Multi Asset is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,610 in First Trust Multi Asset on October 25, 2024 and sell it today you would earn a total of 24.00 from holding First Trust Multi Asset or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discipline Fund ETF vs. First Trust Multi Asset
Performance |
| Timeline |
| Discipline Fund ETF |
| First Trust Multi |
Discipline Fund and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discipline Fund and First Trust
The main advantage of trading using opposite Discipline Fund and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discipline Fund 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.| Discipline Fund vs. ATAC Rotation ETF | Discipline Fund vs. Amplify BlackSwan ISWN | Discipline Fund vs. Tidal ETF Trust | Discipline Fund vs. Aptus Defined Risk |
| First Trust vs. Global X SuperIncome | First Trust vs. iShares Morningstar Multi Asset | First Trust vs. Invesco CEF Income | First Trust vs. VanEck Fallen Angel |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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