Correlation Between First Trust and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both First Trust and FT AlphaDEX 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 FT AlphaDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust AlphaDEX and FT AlphaDEX Industrials, you can compare the effects of market volatilities on First Trust and FT AlphaDEX 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 FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FT AlphaDEX.
Diversification Opportunities for First Trust and FT AlphaDEX
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and FHG is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials 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 AlphaDEX are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of First Trust i.e., First Trust and FT AlphaDEX go up and down completely randomly.
Pair Corralation between First Trust and FT AlphaDEX
Assuming the 90 days trading horizon First Trust is expected to generate 1.35 times less return on investment than FT AlphaDEX. But when comparing it to its historical volatility, First Trust AlphaDEX is 1.05 times less risky than FT AlphaDEX. It trades about 0.22 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,611 in FT AlphaDEX Industrials on August 30, 2024 and sell it today you would earn a total of 524.00 from holding FT AlphaDEX Industrials or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust AlphaDEX vs. FT AlphaDEX Industrials
Performance |
| Timeline |
| First Trust AlphaDEX |
| FT AlphaDEX Industrials |
First Trust and FT AlphaDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FT AlphaDEX
The main advantage of trading using opposite First Trust and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FT AlphaDEX 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 FT AlphaDEX will offset losses from the drop in FT AlphaDEX's long position.| First Trust vs. First Trust AlphaDEX | First Trust vs. FT AlphaDEX Industrials | First Trust vs. BMO SPTSX Equal | First Trust vs. First Trust Senior |
| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust 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 Stocks Directory module to find actively traded stocks across global markets.
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