Correlation Between First Trust and Themes Airlines
Can any of the company-specific risk be diversified away by investing in both First Trust and Themes Airlines 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 Themes Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Capital and Themes Airlines ETF, you can compare the effects of market volatilities on First Trust and Themes Airlines 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 Themes Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Themes Airlines.
Diversification Opportunities for First Trust and Themes Airlines
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Themes is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Capital and Themes Airlines ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Airlines ETF 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 Capital are associated (or correlated) with Themes Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Airlines ETF has no effect on the direction of First Trust i.e., First Trust and Themes Airlines go up and down completely randomly.
Pair Corralation between First Trust and Themes Airlines
Considering the 90-day investment horizon First Trust is expected to generate 2.13 times less return on investment than Themes Airlines. But when comparing it to its historical volatility, First Trust Capital is 1.71 times less risky than Themes Airlines. It trades about 0.05 of its potential returns per unit of risk. Themes Airlines ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,498 in Themes Airlines ETF on September 3, 2024 and sell it today you would earn a total of 455.00 from holding Themes Airlines ETF or generate 18.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 49.9% |
| Values | Daily Returns |
First Trust Capital vs. Themes Airlines ETF
Performance |
| Timeline |
| First Trust Capital |
| Themes Airlines ETF |
First Trust and Themes Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Themes Airlines
The main advantage of trading using opposite First Trust and Themes Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Themes Airlines 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 Themes Airlines will offset losses from the drop in Themes Airlines' long position.| First Trust vs. First Trust Large | First Trust vs. First Trust Dow | First Trust vs. First Trust Multi | First Trust vs. First Trust Multi |
| Themes Airlines vs. First Trust Indxx | Themes Airlines vs. Direxion Daily Industrials | Themes Airlines vs. NATO | Themes Airlines vs. FlexShares STOXX Global |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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