Correlation Between FT AlphaDEX and First Trust
Can any of the company-specific risk be diversified away by investing in both FT AlphaDEX 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 FT AlphaDEX and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT AlphaDEX Industrials and First Trust AlphaDEX, you can compare the effects of market volatilities on FT AlphaDEX 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 FT AlphaDEX with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and First Trust.
Diversification Opportunities for FT AlphaDEX and First Trust
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FHG and First is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and First Trust AlphaDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust AlphaDEX and FT AlphaDEX 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 FT AlphaDEX Industrials 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 AlphaDEX has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and First Trust go up and down completely randomly.
Pair Corralation between FT AlphaDEX and First Trust
Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 1.28 times more return on investment than First Trust. However, FT AlphaDEX is 1.28 times more volatile than First Trust AlphaDEX. It trades about 0.15 of its potential returns per unit of risk. First Trust AlphaDEX is currently generating about 0.09 per unit of risk. If you would invest 4,340 in FT AlphaDEX Industrials on August 29, 2024 and sell it today you would earn a total of 1,845 from holding FT AlphaDEX Industrials or generate 42.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT AlphaDEX Industrials vs. First Trust AlphaDEX
Performance |
| Timeline |
| FT AlphaDEX Industrials |
| First Trust AlphaDEX |
FT AlphaDEX and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT AlphaDEX and First Trust
The main advantage of trading using opposite FT AlphaDEX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX 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.| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
| First Trust vs. First Trust AlphaDEX | First Trust vs. FT AlphaDEX Industrials | First Trust vs. BMO Equal Weight | First Trust vs. iShares Global Healthcare |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |