Correlation Between First Trust and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares Quality 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 FlexShares Quality 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 FlexShares Quality Large, you can compare the effects of market volatilities on First Trust and FlexShares Quality 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 FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Quality.
Diversification Opportunities for First Trust and FlexShares Quality
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and FlexShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and FlexShares Quality Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality Large 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 FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality Large has no effect on the direction of First Trust i.e., First Trust and FlexShares Quality go up and down completely randomly.
Pair Corralation between First Trust and FlexShares Quality
Given the investment horizon of 90 days First Trust is expected to generate 19.46 times less return on investment than FlexShares Quality. But when comparing it to its historical volatility, First Trust Emerging is 1.46 times less risky than FlexShares Quality. It trades about 0.01 of its potential returns per unit of risk. FlexShares Quality Large is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,904 in FlexShares Quality Large on August 29, 2024 and sell it today you would earn a total of 913.00 from holding FlexShares Quality Large or generate 15.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. FlexShares Quality Large
Performance |
| Timeline |
| First Trust Emerging |
| FlexShares Quality Large |
First Trust and FlexShares Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares Quality
The main advantage of trading using opposite First Trust and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares Quality 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 FlexShares Quality will offset losses from the drop in FlexShares Quality's long position.| First Trust vs. First Trust SSI | First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Managed | First Trust vs. First Trust Tactical |
| FlexShares Quality vs. FlexShares Disciplined Duration | FlexShares Quality vs. FlexShares STOXX Global | FlexShares Quality vs. FlexShares Real Assets | FlexShares Quality vs. FlexShares Credit Scored Long |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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