Correlation Between First Trust and Macquarie Focused
Can any of the company-specific risk be diversified away by investing in both First Trust and Macquarie Focused 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 Macquarie Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and Macquarie Focused Emerging, you can compare the effects of market volatilities on First Trust and Macquarie Focused 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 Macquarie Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Macquarie Focused.
Diversification Opportunities for First Trust and Macquarie Focused
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Macquarie is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Macquarie Focused Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Focused 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 Emerging are associated (or correlated) with Macquarie Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Focused has no effect on the direction of First Trust i.e., First Trust and Macquarie Focused go up and down completely randomly.
Pair Corralation between First Trust and Macquarie Focused
Considering the 90-day investment horizon First Trust Emerging is expected to generate 0.9 times more return on investment than Macquarie Focused. However, First Trust Emerging is 1.11 times less risky than Macquarie Focused. It trades about -0.03 of its potential returns per unit of risk. Macquarie Focused Emerging is currently generating about -0.18 per unit of risk. If you would invest 2,266 in First Trust Emerging on August 31, 2024 and sell it today you would lose (18.00) from holding First Trust Emerging or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. Macquarie Focused Emerging
Performance |
| Timeline |
| First Trust Emerging |
| Macquarie Focused |
First Trust and Macquarie Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Macquarie Focused
The main advantage of trading using opposite First Trust and Macquarie Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Macquarie Focused 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 Macquarie Focused will offset losses from the drop in Macquarie Focused's long position.| First Trust vs. First Trust Developed | First Trust vs. First Trust Emerging | First Trust vs. First Trust Europe | First Trust vs. First Trust Large |
| Macquarie Focused vs. Xtrackers MSCI Emerging | Macquarie Focused vs. FlexShares Morningstar Emerging | Macquarie Focused vs. First Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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