Correlation Between First Trust and AB Active
Can any of the company-specific risk be diversified away by investing in both First Trust and AB Active 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 AB Active 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 AB Active ETFs,, you can compare the effects of market volatilities on First Trust and AB Active 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 AB Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AB Active.
Diversification Opportunities for First Trust and AB Active
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and TAFM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and AB Active ETFs, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Active ETFs, 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 AB Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Active ETFs, has no effect on the direction of First Trust i.e., First Trust and AB Active go up and down completely randomly.
Pair Corralation between First Trust and AB Active
Considering the 90-day investment horizon First Trust is expected to generate 1.24 times less return on investment than AB Active. But when comparing it to its historical volatility, First Trust Managed is 1.02 times less risky than AB Active. It trades about 0.06 of its potential returns per unit of risk. AB Active ETFs, is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,442 in AB Active ETFs, on August 25, 2024 and sell it today you would earn a total of 112.00 from holding AB Active ETFs, or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 48.09% |
| Values | Daily Returns |
First Trust Managed vs. AB Active ETFs,
Performance |
| Timeline |
| First Trust Managed |
| AB Active ETFs, |
First Trust and AB Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AB Active
The main advantage of trading using opposite First Trust and AB Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AB Active 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 AB Active will offset losses from the drop in AB Active's long position.| First Trust vs. BlackRock Intermediate Muni | First Trust vs. SSGA Active Trust | First Trust vs. SPDR MarketAxess Investment | First Trust vs. SSGA Active Trust |
| AB Active vs. SSGA Active Trust | AB Active vs. SPDR Nuveen Municipal | AB Active vs. Xtrackers California Municipal | AB Active vs. iShares Short Maturity |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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