Correlation Between First Trust and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both First Trust and WisdomTree Emerging 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 WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Managed and WisdomTree Emerging Currency, you can compare the effects of market volatilities on First Trust and WisdomTree Emerging 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 WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Emerging.
Diversification Opportunities for First Trust and WisdomTree Emerging
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and WisdomTree is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and WisdomTree Emerging Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging 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 Managed are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of First Trust i.e., First Trust and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Emerging
Considering the 90-day investment horizon First Trust Managed is expected to generate 0.56 times more return on investment than WisdomTree Emerging. However, First Trust Managed is 1.77 times less risky than WisdomTree Emerging. It trades about 0.33 of its potential returns per unit of risk. WisdomTree Emerging Currency is currently generating about 0.16 per unit of risk. If you would invest 5,113 in First Trust Managed on September 13, 2024 and sell it today you would earn a total of 55.00 from holding First Trust Managed or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Managed vs. WisdomTree Emerging Currency
Performance |
| Timeline |
| First Trust Managed |
| WisdomTree Emerging |
First Trust and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Emerging
The main advantage of trading using opposite First Trust and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WisdomTree Emerging 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 WisdomTree Emerging will offset losses from the drop in WisdomTree Emerging's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW |
| WisdomTree Emerging vs. First Trust SSI | WisdomTree Emerging vs. First Trust BuyWrite | WisdomTree Emerging vs. First Trust Managed | WisdomTree Emerging vs. First Trust Tactical |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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