Correlation Between First Trust and Global X
Can any of the company-specific risk be diversified away by investing in both First Trust and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and Global X Active, you can compare the effects of market volatilities on First Trust and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Global X.
Diversification Opportunities for First Trust and Global X
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Global is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Global X Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Active 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 Indxx are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Active has no effect on the direction of First Trust i.e., First Trust and Global X go up and down completely randomly.
Pair Corralation between First Trust and Global X
Assuming the 90 days trading horizon First Trust Indxx is expected to generate 0.85 times more return on investment than Global X. However, First Trust Indxx is 1.17 times less risky than Global X. It trades about 0.16 of its potential returns per unit of risk. Global X Active is currently generating about 0.07 per unit of risk. If you would invest 1,051 in First Trust Indxx on September 2, 2024 and sell it today you would earn a total of 102.00 from holding First Trust Indxx or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. Global X Active
Performance |
| Timeline |
| First Trust Indxx |
| Global X Active |
First Trust and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Global X
The main advantage of trading using opposite First Trust and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
| Global X vs. BMO Covered Call | Global X vs. Forstrong Global Income | Global X vs. BMO Aggregate Bond | Global X vs. iShares Canadian HYBrid |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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