Correlation Between IDX Dynamic and First Trust
Can any of the company-specific risk be diversified away by investing in both IDX Dynamic 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 IDX Dynamic and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDX Dynamic Fixed and First Trust Exchange Traded, you can compare the effects of market volatilities on IDX Dynamic 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 IDX Dynamic with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX Dynamic and First Trust.
Diversification Opportunities for IDX Dynamic and First Trust
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IDX and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding IDX Dynamic Fixed 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 IDX Dynamic 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 IDX Dynamic Fixed 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 IDX Dynamic i.e., IDX Dynamic and First Trust go up and down completely randomly.
Pair Corralation between IDX Dynamic and First Trust
Given the investment horizon of 90 days IDX Dynamic Fixed is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, IDX Dynamic Fixed is 1.7 times less risky than First Trust. The etf trades about -0.02 of its potential returns per unit of risk. The First Trust Exchange Traded is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,925 in First Trust Exchange Traded on August 26, 2024 and sell it today you would earn a total of 69.00 from holding First Trust Exchange Traded or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.96% |
| Values | Daily Returns |
IDX Dynamic Fixed vs. First Trust Exchange Traded
Performance |
| Timeline |
| IDX Dynamic Fixed |
| First Trust Exchange |
IDX Dynamic and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDX Dynamic and First Trust
The main advantage of trading using opposite IDX Dynamic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDX Dynamic 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.| IDX Dynamic vs. Capital Group Short | IDX Dynamic vs. Capital Group Municipal | IDX Dynamic vs. Capital Group Global | IDX Dynamic vs. Capital Group Dividend |
| First Trust vs. Vanguard Long Term Treasury | First Trust vs. Vanguard Short Term Treasury | First Trust vs. Vanguard Intermediate Term Corporate | First Trust vs. Vanguard Mortgage Backed Securities |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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