Correlation Between First Trust and Principal Active
Can any of the company-specific risk be diversified away by investing in both First Trust and Principal Active 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 Principal Active 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 Principal Active High, you can compare the effects of market volatilities on First Trust and Principal Active 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 Principal Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Principal Active.
Diversification Opportunities for First Trust and Principal Active
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Principal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and Principal Active High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Active High 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 Principal Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Active High has no effect on the direction of First Trust i.e., First Trust and Principal Active go up and down completely randomly.
Pair Corralation between First Trust and Principal Active
Given the investment horizon of 90 days First Trust Income is expected to generate 1.52 times more return on investment than Principal Active. However, First Trust is 1.52 times more volatile than Principal Active High. It trades about 0.12 of its potential returns per unit of risk. Principal Active High is currently generating about 0.13 per unit of risk. If you would invest 1,771 in First Trust Income on September 12, 2024 and sell it today you would earn a total of 456.00 from holding First Trust Income or generate 25.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
First Trust Income vs. Principal Active High
Performance |
| Timeline |
| First Trust Income |
| Principal Active High |
First Trust and Principal Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Principal Active
The main advantage of trading using opposite First Trust and Principal Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Principal Active 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 Principal Active will offset losses from the drop in Principal Active'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 |
| Principal Active vs. SPDR SSgA Income | Principal Active vs. First Trust Income | Principal Active vs. Saba Closed End Funds | Principal Active vs. Xtrackers Short Duration |
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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