Correlation Between First Trust and Arrow DWA
Can any of the company-specific risk be diversified away by investing in both First Trust and Arrow DWA 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 Arrow DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Income and Arrow DWA Tactical, you can compare the effects of market volatilities on First Trust and Arrow DWA 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 Arrow DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Arrow DWA.
Diversification Opportunities for First Trust and Arrow DWA
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Arrow is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and Arrow DWA Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow DWA Tactical 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 Income are associated (or correlated) with Arrow DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow DWA Tactical has no effect on the direction of First Trust i.e., First Trust and Arrow DWA go up and down completely randomly.
Pair Corralation between First Trust and Arrow DWA
Given the investment horizon of 90 days First Trust is expected to generate 1.14 times less return on investment than Arrow DWA. But when comparing it to its historical volatility, First Trust Income is 1.76 times less risky than Arrow DWA. It trades about 0.27 of its potential returns per unit of risk. Arrow DWA Tactical is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,164 in Arrow DWA Tactical on November 4, 2024 and sell it today you would earn a total of 34.00 from holding Arrow DWA Tactical or generate 2.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Income vs. Arrow DWA Tactical
Performance |
| Timeline |
| First Trust Income |
| Arrow DWA Tactical |
First Trust and Arrow DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Arrow DWA
The main advantage of trading using opposite First Trust and Arrow DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Arrow DWA 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 Arrow DWA will offset losses from the drop in Arrow DWA's long position.| First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Emerging | First Trust vs. First Trust SSI | First Trust vs. First Trust Alternative |
| Arrow DWA vs. Arrow DWA Tactical | Arrow DWA vs. FlexShares Real Assets | Arrow DWA vs. First Trust Income | Arrow DWA vs. VictoryShares Discovery Enhanced |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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