Correlation Between Balanced Fund and First Trust
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and First Trust Short, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and First Trust.
Diversification Opportunities for Balanced Fund and First Trust
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Balanced Fund 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 Balanced Fund Retail 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 Short has no effect on the direction of Balanced Fund i.e., Balanced Fund and First Trust go up and down completely randomly.
Pair Corralation between Balanced Fund and First Trust
Assuming the 90 days horizon Balanced Fund Retail is expected to generate 2.98 times more return on investment than First Trust. However, Balanced Fund is 2.98 times more volatile than First Trust Short. It trades about 0.1 of its potential returns per unit of risk. First Trust Short is currently generating about 0.17 per unit of risk. If you would invest 1,119 in Balanced Fund Retail on September 14, 2024 and sell it today you would earn a total of 331.00 from holding Balanced Fund Retail or generate 29.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Retail vs. First Trust Short
Performance |
| Timeline |
| Balanced Fund Retail |
| First Trust Short |
Balanced Fund and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and First Trust
The main advantage of trading using opposite Balanced Fund and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Muirfield Fund Retail | Balanced Fund vs. Dynamic Growth Fund | Balanced Fund vs. Infrastructure Fund Retail | Balanced Fund vs. Quantex Fund Retail |
| First Trust vs. Cutler Equity | First Trust vs. Balanced Fund Retail | First Trust vs. Touchstone International Equity | First Trust vs. Gmo Global Equity |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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