Correlation Between First Trust and Professionally Managed
Can any of the company-specific risk be diversified away by investing in both First Trust and Professionally Managed 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 Professionally Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dow and Professionally Managed Portfolios, you can compare the effects of market volatilities on First Trust and Professionally Managed 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 Professionally Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Professionally Managed.
Diversification Opportunities for First Trust and Professionally Managed
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Professionally is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed 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 Dow are associated (or correlated) with Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of First Trust i.e., First Trust and Professionally Managed go up and down completely randomly.
Pair Corralation between First Trust and Professionally Managed
Considering the 90-day investment horizon First Trust Dow is expected to generate 1.59 times more return on investment than Professionally Managed. However, First Trust is 1.59 times more volatile than Professionally Managed Portfolios. It trades about 0.28 of its potential returns per unit of risk. Professionally Managed Portfolios is currently generating about 0.08 per unit of risk. If you would invest 6,537 in First Trust Dow on August 27, 2024 and sell it today you would earn a total of 761.00 from holding First Trust Dow or generate 11.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dow vs. Professionally Managed Portfol
Performance |
| Timeline |
| First Trust Dow |
| Professionally Managed |
First Trust and Professionally Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Professionally Managed
The main advantage of trading using opposite First Trust and Professionally Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Professionally Managed 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 Professionally Managed will offset losses from the drop in Professionally Managed's long position.| First Trust vs. iShares Micro Cap ETF | First Trust vs. Invesco SP MidCap | First Trust vs. Invesco SP SmallCap | First Trust vs. First Trust Small |
| Professionally Managed vs. Vanguard Mid Cap Index | Professionally Managed vs. iShares Core SP | Professionally Managed vs. SPDR SP MIDCAP | Professionally Managed vs. First Trust Dorsey |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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