Correlation Between First Trust and Esoterica NextG
Can any of the company-specific risk be diversified away by investing in both First Trust and Esoterica NextG 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 Esoterica NextG 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 Esoterica NextG Economy, you can compare the effects of market volatilities on First Trust and Esoterica NextG 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 Esoterica NextG. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Esoterica NextG.
Diversification Opportunities for First Trust and Esoterica NextG
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Esoterica is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and Esoterica NextG Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esoterica NextG Economy 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 Esoterica NextG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esoterica NextG Economy has no effect on the direction of First Trust i.e., First Trust and Esoterica NextG go up and down completely randomly.
Pair Corralation between First Trust and Esoterica NextG
Considering the 90-day investment horizon First Trust Dow is expected to generate 0.91 times more return on investment than Esoterica NextG. However, First Trust Dow is 1.1 times less risky than Esoterica NextG. It trades about 0.39 of its potential returns per unit of risk. Esoterica NextG Economy is currently generating about 0.16 per unit of risk. If you would invest 21,948 in First Trust Dow on September 1, 2024 and sell it today you would earn a total of 2,209 from holding First Trust Dow or generate 10.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Dow vs. Esoterica NextG Economy
Performance |
| Timeline |
| First Trust Dow |
| Esoterica NextG Economy |
First Trust and Esoterica NextG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Esoterica NextG
The main advantage of trading using opposite First Trust and Esoterica NextG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Esoterica NextG 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 Esoterica NextG will offset losses from the drop in Esoterica NextG's long position.| First Trust vs. First Trust Cloud | First Trust vs. iShares Expanded Tech Software | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust NASDAQ 100 Technology |
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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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