Correlation Between First Trust and Columbia Multi
Can any of the company-specific risk be diversified away by investing in both First Trust and Columbia Multi 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 Columbia Multi 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 Columbia Multi Sector Municipal, you can compare the effects of market volatilities on First Trust and Columbia Multi 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 Columbia Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Columbia Multi.
Diversification Opportunities for First Trust and Columbia Multi
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Columbia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and Columbia Multi Sector Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Multi Sector 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 Columbia Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Multi Sector has no effect on the direction of First Trust i.e., First Trust and Columbia Multi go up and down completely randomly.
Pair Corralation between First Trust and Columbia Multi
Considering the 90-day investment horizon First Trust Managed is expected to generate 0.5 times more return on investment than Columbia Multi. However, First Trust Managed is 2.02 times less risky than Columbia Multi. It trades about 0.04 of its potential returns per unit of risk. Columbia Multi Sector Municipal is currently generating about -0.03 per unit of risk. If you would invest 5,096 in First Trust Managed on November 3, 2024 and sell it today you would earn a total of 8.00 from holding First Trust Managed or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Trust Managed vs. Columbia Multi Sector Municipa
Performance |
| Timeline |
| First Trust Managed |
| Columbia Multi Sector |
First Trust and Columbia Multi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Columbia Multi
The main advantage of trading using opposite First Trust and Columbia Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Columbia Multi 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 Columbia Multi will offset losses from the drop in Columbia Multi'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 |
| Columbia Multi vs. IQ MacKay Municipal | Columbia Multi vs. IQ MacKay Municipal | Columbia Multi vs. American Century Diversified | Columbia Multi vs. Hartford Municipal Opportunities |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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