Correlation Between First Trust and NXG NextGen
Can any of the company-specific risk be diversified away by investing in both First Trust and NXG NextGen 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 NXG NextGen 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 NXG NextGen Infrastructure, you can compare the effects of market volatilities on First Trust and NXG NextGen 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 NXG NextGen. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and NXG NextGen.
Diversification Opportunities for First Trust and NXG NextGen
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and NXG is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr 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 NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of First Trust i.e., First Trust and NXG NextGen go up and down completely randomly.
Pair Corralation between First Trust and NXG NextGen
Considering the 90-day investment horizon First Trust is expected to generate 4.05 times less return on investment than NXG NextGen. But when comparing it to its historical volatility, First Trust Specialty is 1.95 times less risky than NXG NextGen. It trades about 0.24 of its potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 4,350 in NXG NextGen Infrastructure on August 27, 2024 and sell it today you would earn a total of 597.00 from holding NXG NextGen Infrastructure or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. NXG NextGen Infrastructure
Performance |
| Timeline |
| First Trust Specialty |
| NXG NextGen Infrastr |
First Trust and NXG NextGen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and NXG NextGen
The main advantage of trading using opposite First Trust and NXG NextGen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, NXG NextGen 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 NXG NextGen will offset losses from the drop in NXG NextGen'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 |
| NXG NextGen vs. MFS Investment Grade | NXG NextGen vs. Invesco High Income | NXG NextGen vs. Eaton Vance National | NXG NextGen vs. Nuveen California Select |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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