Correlation Between First Trust and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both First Trust and Franklin FTSE 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Europe and Franklin FTSE Europe, you can compare the effects of market volatilities on First Trust and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Franklin FTSE.
Diversification Opportunities for First Trust and Franklin FTSE
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Franklin is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Europe and Franklin FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Europe 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 Europe are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Europe has no effect on the direction of First Trust i.e., First Trust and Franklin FTSE go up and down completely randomly.
Pair Corralation between First Trust and Franklin FTSE
Considering the 90-day investment horizon First Trust Europe is expected to generate 1.18 times more return on investment than Franklin FTSE. However, First Trust is 1.18 times more volatile than Franklin FTSE Europe. It trades about -0.03 of its potential returns per unit of risk. Franklin FTSE Europe is currently generating about -0.09 per unit of risk. If you would invest 3,737 in First Trust Europe on September 1, 2024 and sell it today you would lose (32.00) from holding First Trust Europe or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Europe vs. Franklin FTSE Europe
Performance |
| Timeline |
| First Trust Europe |
| Franklin FTSE Europe |
First Trust and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Franklin FTSE
The main advantage of trading using opposite First Trust and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| First Trust vs. First Trust Emerging | First Trust vs. First Trust Developed | First Trust vs. First Trust Large | First Trust vs. First Trust Japan |
| Franklin FTSE vs. Franklin FTSE United | Franklin FTSE vs. SPDR Portfolio Europe | Franklin FTSE vs. Franklin FTSE Germany | Franklin FTSE vs. Franklin FTSE Japan |
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.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |