Correlation Between First Trust and Royce International
Can any of the company-specific risk be diversified away by investing in both First Trust and Royce International 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 Royce International 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 Royce International Premier, you can compare the effects of market volatilities on First Trust and Royce International 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 Royce International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Royce International.
Diversification Opportunities for First Trust and Royce International
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Royce is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Royce International Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce International 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 Royce International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce International has no effect on the direction of First Trust i.e., First Trust and Royce International go up and down completely randomly.
Pair Corralation between First Trust and Royce International
Considering the 90-day investment horizon First Trust Specialty is expected to generate 0.99 times more return on investment than Royce International. However, First Trust Specialty is 1.01 times less risky than Royce International. It trades about 0.33 of its potential returns per unit of risk. Royce International Premier is currently generating about -0.07 per unit of risk. If you would invest 404.00 in First Trust Specialty on August 31, 2024 and sell it today you would earn a total of 20.00 from holding First Trust Specialty or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. Royce International Premier
Performance |
| Timeline |
| First Trust Specialty |
| Royce International |
First Trust and Royce International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Royce International
The main advantage of trading using opposite First Trust and Royce International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Royce International 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 Royce International will offset losses from the drop in Royce International's long position.| First Trust vs. MFS Investment Grade | First Trust vs. Eaton Vance Municipal | First Trust vs. DTF Tax Free | First Trust vs. HUMANA INC |
| Royce International vs. Tax Managed Large Cap | Royce International vs. Virtus Nfj Large Cap | Royce International vs. Fundamental Large Cap | Royce International vs. Jhancock Disciplined Value |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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