Correlation Between First Trust and Mid Cap
Can any of the company-specific risk be diversified away by investing in both First Trust and Mid Cap 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 Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Mid Cap Value, you can compare the effects of market volatilities on First Trust and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Mid Cap.
Diversification Opportunities for First Trust and Mid Cap
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Mid is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Specialty are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of First Trust i.e., First Trust and Mid Cap go up and down completely randomly.
Pair Corralation between First Trust and Mid Cap
Considering the 90-day investment horizon First Trust Specialty is expected to generate 1.77 times more return on investment than Mid Cap. However, First Trust is 1.77 times more volatile than Mid Cap Value. It trades about 0.08 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.04 per unit of risk. If you would invest 274.00 in First Trust Specialty on September 1, 2024 and sell it today you would earn a total of 154.00 from holding First Trust Specialty or generate 56.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.78% |
| Values | Daily Returns |
First Trust Specialty vs. Mid Cap Value
Performance |
| Timeline |
| First Trust Specialty |
| Mid Cap Value |
First Trust and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Mid Cap
The main advantage of trading using opposite First Trust and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
| Mid Cap vs. Goldman Sachs Emerging | Mid Cap vs. Aqr Long Short Equity | Mid Cap vs. Sp Midcap Index | Mid Cap vs. Vanguard Developed Markets |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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