Correlation Between First Trust and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both First Trust and Xtrackers FTSE 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 Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Intl and Xtrackers FTSE Developed, you can compare the effects of market volatilities on First Trust and Xtrackers FTSE 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Xtrackers FTSE.
Diversification Opportunities for First Trust and Xtrackers FTSE
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Xtrackers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intl and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed 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 Intl are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of First Trust i.e., First Trust and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between First Trust and Xtrackers FTSE
Considering the 90-day investment horizon First Trust is expected to generate 1.29 times less return on investment than Xtrackers FTSE. But when comparing it to its historical volatility, First Trust Intl is 1.02 times less risky than Xtrackers FTSE. It trades about 0.05 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,359 in Xtrackers FTSE Developed on September 13, 2024 and sell it today you would earn a total of 596.00 from holding Xtrackers FTSE Developed or generate 25.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Intl vs. Xtrackers FTSE Developed
Performance |
| Timeline |
| First Trust Intl |
| Xtrackers FTSE Developed |
First Trust and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Xtrackers FTSE
The main advantage of trading using opposite First Trust and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Xtrackers FTSE 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 Xtrackers FTSE will offset losses from the drop in Xtrackers FTSE's long position.| First Trust vs. Global X MSCI | First Trust vs. Global X Alternative | First Trust vs. iShares AsiaPacific Dividend |
| Xtrackers FTSE vs. Global X MSCI | Xtrackers FTSE vs. Global X Alternative | Xtrackers FTSE vs. First Trust Intl | Xtrackers FTSE vs. iShares AsiaPacific Dividend |
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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