Correlation Between E3 Lithium and First Trust
Can any of the company-specific risk be diversified away by investing in both E3 Lithium 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 E3 Lithium and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E3 Lithium and First Trust Indxx, you can compare the effects of market volatilities on E3 Lithium 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 E3 Lithium with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of E3 Lithium and First Trust.
Diversification Opportunities for E3 Lithium and First Trust
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ETL and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding E3 Lithium and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and E3 Lithium 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 E3 Lithium 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 Indxx has no effect on the direction of E3 Lithium i.e., E3 Lithium and First Trust go up and down completely randomly.
Pair Corralation between E3 Lithium and First Trust
Assuming the 90 days horizon E3 Lithium is expected to under-perform the First Trust. In addition to that, E3 Lithium is 9.92 times more volatile than First Trust Indxx. It trades about -0.04 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.18 per unit of volatility. If you would invest 1,021 in First Trust Indxx on August 31, 2024 and sell it today you would earn a total of 132.00 from holding First Trust Indxx or generate 12.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
E3 Lithium vs. First Trust Indxx
Performance |
| Timeline |
| E3 Lithium |
| First Trust Indxx |
E3 Lithium and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E3 Lithium and First Trust
The main advantage of trading using opposite E3 Lithium and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E3 Lithium 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.| E3 Lithium vs. Solar Alliance Energy | E3 Lithium vs. Global X Active | E3 Lithium vs. Financial 15 Split | E3 Lithium vs. Rubicon Organics |
| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
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 CEOs Directory module to screen CEOs from public companies around the world.
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