Correlation Between First Trust and EA Series
Can any of the company-specific risk be diversified away by investing in both First Trust and EA Series 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 EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Large and EA Series Trust, you can compare the effects of market volatilities on First Trust and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and EA Series.
Diversification Opportunities for First Trust and EA Series
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and STXK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Large and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 Large are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of First Trust i.e., First Trust and EA Series go up and down completely randomly.
Pair Corralation between First Trust and EA Series
Considering the 90-day investment horizon First Trust is expected to generate 1.12 times less return on investment than EA Series. But when comparing it to its historical volatility, First Trust Large is 1.59 times less risky than EA Series. It trades about 0.33 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,142 in EA Series Trust on August 27, 2024 and sell it today you would earn a total of 224.00 from holding EA Series Trust or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Large vs. EA Series Trust
Performance |
| Timeline |
| First Trust Large |
| EA Series Trust |
First Trust and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and EA Series
The main advantage of trading using opposite First Trust and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' long position.| First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Mid | First Trust vs. First Trust Large |
| EA Series vs. EA Series Trust | EA Series vs. EA Series Trust | EA Series vs. EA Series Trust | EA Series vs. EA Series Trust |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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