Correlation Between First Trust and Matthews Emerging
Can any of the company-specific risk be diversified away by investing in both First Trust and Matthews Emerging 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 Matthews Emerging 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 Matthews Emerging Markets, you can compare the effects of market volatilities on First Trust and Matthews Emerging 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 Matthews Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Matthews Emerging.
Diversification Opportunities for First Trust and Matthews Emerging
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Matthews is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Matthews Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Emerging Markets 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 Matthews Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Emerging Markets has no effect on the direction of First Trust i.e., First Trust and Matthews Emerging go up and down completely randomly.
Pair Corralation between First Trust and Matthews Emerging
Considering the 90-day investment horizon First Trust Emerging is expected to under-perform the Matthews Emerging. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Emerging is 1.15 times less risky than Matthews Emerging. The etf trades about -0.03 of its potential returns per unit of risk. The Matthews Emerging Markets is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,592 in Matthews Emerging Markets on September 2, 2024 and sell it today you would earn a total of 9.00 from holding Matthews Emerging Markets or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. Matthews Emerging Markets
Performance |
| Timeline |
| First Trust Emerging |
| Matthews Emerging Markets |
First Trust and Matthews Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Matthews Emerging
The main advantage of trading using opposite First Trust and Matthews Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Matthews Emerging 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 Matthews Emerging will offset losses from the drop in Matthews Emerging'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 |
| Matthews Emerging vs. Direxion Daily MSCI | Matthews Emerging vs. Innovator MSCI Emerging | Matthews Emerging vs. Innovator ETFs Trust | Matthews Emerging vs. Innovator 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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