Correlation Between First American and First Trust
Can any of the company-specific risk be diversified away by investing in both First American and First Trust 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 American and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and First Trust Short, you can compare the effects of market volatilities on First American and First Trust 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 American with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and First Trust.
Diversification Opportunities for First American and First Trust
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and First American 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 American Funds are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of First American i.e., First American and First Trust go up and down completely randomly.
Pair Corralation between First American and First Trust
If you would invest 1,804 in First Trust Short on September 2, 2024 and sell it today you would earn a total of 9.00 from holding First Trust Short or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American Funds vs. First Trust Short
Performance |
| Timeline |
| First American Funds |
| First Trust Short |
First American and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and First Trust
The main advantage of trading using opposite First American and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| First American vs. Ab Select Longshort | First American vs. Touchstone Ultra Short | First American vs. Chartwell Short Duration | First American vs. Maryland Short Term Tax Free |
| First Trust vs. Ab Global Risk | First Trust vs. Needham Aggressive Growth | First Trust vs. Federated Institutional High | First Trust vs. California High Yield Municipal |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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