Correlation Between First Trust and Bridge Builder
Can any of the company-specific risk be diversified away by investing in both First Trust and Bridge Builder 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 Bridge Builder 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 Bridge Builder E, you can compare the effects of market volatilities on First Trust and Bridge Builder 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 Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Bridge Builder.
Diversification Opportunities for First Trust and Bridge Builder
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Bridge is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Bridge Builder E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder E 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 Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder E has no effect on the direction of First Trust i.e., First Trust and Bridge Builder go up and down completely randomly.
Pair Corralation between First Trust and Bridge Builder
Considering the 90-day investment horizon First Trust Specialty is expected to generate 1.92 times more return on investment than Bridge Builder. However, First Trust is 1.92 times more volatile than Bridge Builder E. It trades about 0.47 of its potential returns per unit of risk. Bridge Builder E is currently generating about 0.1 per unit of risk. If you would invest 401.00 in First Trust Specialty on September 1, 2024 and sell it today you would earn a total of 27.00 from holding First Trust Specialty or generate 6.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Specialty vs. Bridge Builder E
Performance |
| Timeline |
| First Trust Specialty |
| Bridge Builder E |
First Trust and Bridge Builder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Bridge Builder
The main advantage of trading using opposite First Trust and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Bridge Builder 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 Bridge Builder will offset losses from the drop in Bridge Builder'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 |
| Bridge Builder vs. Bridge Builder E | Bridge Builder vs. Bridge Builder Large | Bridge Builder vs. Bridge Builder Smallmid | Bridge Builder vs. Bridge Builder International |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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