Correlation Between First Trust and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust and Xtrackers MSCI 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 Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Developed and Xtrackers MSCI Kokusai, you can compare the effects of market volatilities on First Trust and Xtrackers MSCI 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 Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Xtrackers MSCI.
Diversification Opportunities for First Trust and Xtrackers MSCI
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Xtrackers is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Developed and Xtrackers MSCI Kokusai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Kokusai 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 Developed are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Kokusai has no effect on the direction of First Trust i.e., First Trust and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between First Trust and Xtrackers MSCI
Given the investment horizon of 90 days First Trust Developed is expected to under-perform the Xtrackers MSCI. In addition to that, First Trust is 1.63 times more volatile than Xtrackers MSCI Kokusai. It trades about 0.0 of its total potential returns per unit of risk. Xtrackers MSCI Kokusai is currently generating about 0.11 per unit of volatility. If you would invest 9,117 in Xtrackers MSCI Kokusai on September 3, 2024 and sell it today you would earn a total of 1,288 from holding Xtrackers MSCI Kokusai or generate 14.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Developed vs. Xtrackers MSCI Kokusai
Performance |
| Timeline |
| First Trust Developed |
| Xtrackers MSCI Kokusai |
First Trust and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Xtrackers MSCI
The main advantage of trading using opposite First Trust and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Xtrackers MSCI 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| First Trust vs. First Trust Asia | First Trust vs. First Trust United | First Trust vs. First Trust Germany | First Trust vs. First Trust Japan |
| Xtrackers MSCI vs. SmartETFs Asia Pacific | Xtrackers MSCI vs. Listed Funds Trust | Xtrackers MSCI vs. iShares AsiaPacific Dividend | Xtrackers MSCI vs. ProShares MSCI Emerging |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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