Correlation Between First Trust and SHP ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and SHP ETF 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 SHP ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust TCW and SHP ETF Trust, you can compare the effects of market volatilities on First Trust and SHP ETF 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 SHP ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SHP ETF.
Diversification Opportunities for First Trust and SHP ETF
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and SHP is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 TCW are associated (or correlated) with SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of First Trust i.e., First Trust and SHP ETF go up and down completely randomly.
Pair Corralation between First Trust and SHP ETF
Given the investment horizon of 90 days First Trust is expected to generate 1.79 times less return on investment than SHP ETF. In addition to that, First Trust is 7.25 times more volatile than SHP ETF Trust. It trades about 0.03 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about 0.36 per unit of volatility. If you would invest 4,446 in SHP ETF Trust on August 29, 2024 and sell it today you would earn a total of 539.00 from holding SHP ETF Trust or generate 12.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust TCW vs. SHP ETF Trust
Performance |
| Timeline |
| First Trust TCW |
| SHP ETF Trust |
First Trust and SHP ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SHP ETF
The main advantage of trading using opposite First Trust and SHP ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SHP ETF 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 SHP ETF will offset losses from the drop in SHP ETF's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Tactical | First Trust vs. First Trust Managed |
| SHP ETF vs. SHP ETF Trust | SHP ETF vs. SHP ETF Trust | SHP ETF vs. iShares Trust | SHP ETF vs. VanEck ETF Trust |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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