Correlation Between First Trust and United States
Can any of the company-specific risk be diversified away by investing in both First Trust and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Natural and United States 12, you can compare the effects of market volatilities on First Trust and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and United States.
Diversification Opportunities for First Trust and United States
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and United is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Natural and United States 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States 12 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 Natural are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States 12 has no effect on the direction of First Trust i.e., First Trust and United States go up and down completely randomly.
Pair Corralation between First Trust and United States
Considering the 90-day investment horizon First Trust Natural is expected to generate 0.78 times more return on investment than United States. However, First Trust Natural is 1.28 times less risky than United States. It trades about 0.03 of its potential returns per unit of risk. United States 12 is currently generating about -0.04 per unit of risk. If you would invest 2,269 in First Trust Natural on August 24, 2024 and sell it today you would earn a total of 364.00 from holding First Trust Natural or generate 16.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Natural vs. United States 12
Performance |
| Timeline |
| First Trust Natural |
| United States 12 |
First Trust and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and United States
The main advantage of trading using opposite First Trust and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| First Trust vs. iShares Oil Gas | First Trust vs. Invesco Dynamic Energy | First Trust vs. SPDR SP Oil | First Trust vs. United States Natural |
| United States vs. United States 12 | United States vs. United States Gasoline | United States vs. First Trust Natural | United States vs. ProShares UltraShort Bloomberg |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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