Correlation Between Arrow DWA and First Trust
Can any of the company-specific risk be diversified away by investing in both Arrow DWA 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 Arrow DWA and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow DWA Tactical and First Trust Dorsey, you can compare the effects of market volatilities on Arrow DWA 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 Arrow DWA with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow DWA and First Trust.
Diversification Opportunities for Arrow DWA and First Trust
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arrow and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Arrow DWA Tactical and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and Arrow DWA 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 Arrow DWA Tactical 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 Dorsey has no effect on the direction of Arrow DWA i.e., Arrow DWA and First Trust go up and down completely randomly.
Pair Corralation between Arrow DWA and First Trust
Given the investment horizon of 90 days Arrow DWA Tactical is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Arrow DWA Tactical is 1.43 times less risky than First Trust. The etf trades about -0.06 of its potential returns per unit of risk. The First Trust Dorsey is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,547 in First Trust Dorsey on August 29, 2024 and sell it today you would earn a total of 553.00 from holding First Trust Dorsey or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow DWA Tactical vs. First Trust Dorsey
Performance |
| Timeline |
| Arrow DWA Tactical |
| First Trust Dorsey |
Arrow DWA and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow DWA and First Trust
The main advantage of trading using opposite Arrow DWA and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow DWA 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.The idea behind Arrow DWA Tactical and First Trust Dorsey pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
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.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |