Correlation Between Ecofin Global and First Trust
Can any of the company-specific risk be diversified away by investing in both Ecofin Global 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 Ecofin Global and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecofin Global Water and First Trust Water, you can compare the effects of market volatilities on Ecofin Global 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 Ecofin Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofin Global and First Trust.
Diversification Opportunities for Ecofin Global and First Trust
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecofin and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecofin Global Water and First Trust Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Water and Ecofin Global 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 Ecofin Global Water 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 Water has no effect on the direction of Ecofin Global i.e., Ecofin Global and First Trust go up and down completely randomly.
Pair Corralation between Ecofin Global and First Trust
Given the investment horizon of 90 days Ecofin Global Water is expected to generate 0.99 times more return on investment than First Trust. However, Ecofin Global Water is 1.02 times less risky than First Trust. It trades about 0.33 of its potential returns per unit of risk. First Trust Water is currently generating about 0.1 per unit of risk. If you would invest 4,758 in Ecofin Global Water on September 3, 2024 and sell it today you would earn a total of 259.00 from holding Ecofin Global Water or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.25% |
| Values | Daily Returns |
Ecofin Global Water vs. First Trust Water
Performance |
| Timeline |
| Ecofin Global Water |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| First Trust Water |
Ecofin Global and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecofin Global and First Trust
The main advantage of trading using opposite Ecofin Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofin Global 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.| Ecofin Global vs. First Trust Water | Ecofin Global vs. Global X Clean | Ecofin Global vs. Invesco SP Global | Ecofin Global vs. Invesco Global Water |
| First Trust vs. Invesco SP Global | First Trust vs. Invesco Global Water | First Trust vs. Invesco Water Resources | First Trust vs. First Trust NASDAQ |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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