Correlation Between Global X and First Trust
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Emerging and First Trust TCW, you can compare the effects of market volatilities on Global X 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 Global X with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and First Trust.
Diversification Opportunities for Global X and First Trust
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global X Emerging and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and Global X 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 Global X Emerging 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 TCW has no effect on the direction of Global X i.e., Global X and First Trust go up and down completely randomly.
Pair Corralation between Global X and First Trust
Given the investment horizon of 90 days Global X is expected to generate 1.08 times less return on investment than First Trust. In addition to that, Global X is 1.04 times more volatile than First Trust TCW. It trades about 0.06 of its total potential returns per unit of risk. First Trust TCW is currently generating about 0.07 per unit of volatility. If you would invest 1,625 in First Trust TCW on August 29, 2024 and sell it today you would earn a total of 13.00 from holding First Trust TCW or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Emerging vs. First Trust TCW
Performance |
| Timeline |
| Global X Emerging |
| First Trust TCW |
Global X and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and First Trust
The main advantage of trading using opposite Global X and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Global X Variable | Global X vs. Global X Alternative | Global X vs. Global X SP | Global X vs. Global X MSCI |
| First Trust vs. First Trust TCW | First Trust vs. SPDR Bloomberg Barclays | First Trust vs. First Trust Short | First Trust vs. First Trust Emerging |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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