Correlation Between First Trust and Sprott Junior
Can any of the company-specific risk be diversified away by investing in both First Trust and Sprott Junior 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 Sprott Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Water and Sprott Junior Uranium, you can compare the effects of market volatilities on First Trust and Sprott Junior 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 Sprott Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Sprott Junior.
Diversification Opportunities for First Trust and Sprott Junior
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Sprott is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Water and Sprott Junior Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Uranium 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 Water are associated (or correlated) with Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Uranium has no effect on the direction of First Trust i.e., First Trust and Sprott Junior go up and down completely randomly.
Pair Corralation between First Trust and Sprott Junior
Considering the 90-day investment horizon First Trust Water is expected to generate 0.23 times more return on investment than Sprott Junior. However, First Trust Water is 4.31 times less risky than Sprott Junior. It trades about 0.23 of its potential returns per unit of risk. Sprott Junior Uranium is currently generating about -0.04 per unit of risk. If you would invest 10,161 in First Trust Water on November 9, 2024 and sell it today you would earn a total of 386.00 from holding First Trust Water or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Water vs. Sprott Junior Uranium
Performance |
| Timeline |
| First Trust Water |
| Sprott Junior Uranium |
First Trust and Sprott Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Sprott Junior
The main advantage of trading using opposite First Trust and Sprott Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Sprott Junior 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 Sprott Junior will offset losses from the drop in Sprott Junior's long position.| First Trust vs. Invesco SP Global | First Trust vs. Invesco Global Water | First Trust vs. Invesco Water Resources | First Trust vs. First Trust NASDAQ |
| Sprott Junior vs. Sprott Junior Copper | Sprott Junior vs. Sprott Energy Transition | Sprott Junior vs. Sprott Lithium Miners | Sprott Junior vs. Sprott Uranium Miners |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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