Correlation Between First Trust and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both First Trust and Franklin 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Latin and Franklin FTSE Brazil, you can compare the effects of market volatilities on First Trust and Franklin 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Franklin FTSE.
Diversification Opportunities for First Trust and Franklin FTSE
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Franklin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Latin and Franklin FTSE Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Brazil 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 Latin are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Brazil has no effect on the direction of First Trust i.e., First Trust and Franklin FTSE go up and down completely randomly.
Pair Corralation between First Trust and Franklin FTSE
Considering the 90-day investment horizon First Trust Latin is expected to under-perform the Franklin FTSE. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Latin is 1.07 times less risky than Franklin FTSE. The etf trades about -0.07 of its potential returns per unit of risk. The Franklin FTSE Brazil is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,747 in Franklin FTSE Brazil on August 29, 2024 and sell it today you would lose (120.00) from holding Franklin FTSE Brazil or give up 6.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Latin vs. Franklin FTSE Brazil
Performance |
| Timeline |
| First Trust Latin |
| Franklin FTSE Brazil |
First Trust and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Franklin FTSE
The main advantage of trading using opposite First Trust and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Franklin 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| First Trust vs. First Trust Brazil | First Trust vs. First Trust Asia | First Trust vs. First Trust Japan | First Trust vs. First Trust Germany |
| Franklin FTSE vs. Franklin FTSE Mexico | Franklin FTSE vs. Franklin FTSE India | Franklin FTSE vs. Franklin FTSE South | Franklin FTSE vs. Franklin FTSE Japan |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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