Correlation Between First Trust and Lithium Boron
Can any of the company-specific risk be diversified away by investing in both First Trust and Lithium Boron 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 First Trust and Lithium Boron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Lithium Boron Technology, you can compare the effects of market volatilities on First Trust and Lithium Boron 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 First Trust with a short position of Lithium Boron. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Lithium Boron.
Diversification Opportunities for First Trust and Lithium Boron
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Lithium is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Lithium Boron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Boron Technology and First Trust 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 First Trust Exchange Traded are associated (or correlated) with Lithium Boron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Boron Technology has no effect on the direction of First Trust i.e., First Trust and Lithium Boron go up and down completely randomly.
Pair Corralation between First Trust and Lithium Boron
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 1.14 times more return on investment than Lithium Boron. However, First Trust is 1.14 times more volatile than Lithium Boron Technology. It trades about 0.46 of its potential returns per unit of risk. Lithium Boron Technology is currently generating about -0.02 per unit of risk. If you would invest 2,442 in First Trust Exchange Traded on August 27, 2024 and sell it today you would earn a total of 207.00 from holding First Trust Exchange Traded or generate 8.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Lithium Boron Technology
Performance |
| Timeline |
| First Trust Exchange |
| Lithium Boron Technology |
First Trust and Lithium Boron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Lithium Boron
The main advantage of trading using opposite First Trust and Lithium Boron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Lithium Boron 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 Lithium Boron will offset losses from the drop in Lithium Boron's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust SMID | First Trust vs. First Trust TCW | First Trust vs. First Trust TCW |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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