Correlation Between First Trust and European Equity
Can any of the company-specific risk be diversified away by investing in both First Trust and European Equity 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 European Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Energy and European Equity Closed, you can compare the effects of market volatilities on First Trust and European Equity 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 European Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and European Equity.
Diversification Opportunities for First Trust and European Equity
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and European is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed 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 Energy are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of First Trust i.e., First Trust and European Equity go up and down completely randomly.
Pair Corralation between First Trust and European Equity
If you would invest 827.00 in European Equity Closed on October 22, 2024 and sell it today you would earn a total of 12.00 from holding European Equity Closed or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 5.56% |
| Values | Daily Returns |
First Trust Energy vs. European Equity Closed
Performance |
| Timeline |
| First Trust Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| European Equity Closed |
First Trust and European Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and European Equity
The main advantage of trading using opposite First Trust and European Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, European Equity 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 European Equity will offset losses from the drop in European Equity's long position.| First Trust vs. Eagle Point Income | First Trust vs. European Equity Closed | First Trust vs. John Hancock Income | First Trust vs. First Trust Intermediate |
| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Western Asset High |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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