Correlation Between First Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Municipal and First Trust Ultra, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Trust.
Diversification Opportunities for First Trust and First Trust
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and First is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Municipal and First Trust Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Ultra 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 Municipal 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 Ultra has no effect on the direction of First Trust i.e., First Trust and First Trust go up and down completely randomly.
Pair Corralation between First Trust and First Trust
Given the investment horizon of 90 days First Trust Municipal is expected to generate 3.47 times more return on investment than First Trust. However, First Trust is 3.47 times more volatile than First Trust Ultra. It trades about 0.08 of its potential returns per unit of risk. First Trust Ultra is currently generating about 0.12 per unit of risk. If you would invest 4,353 in First Trust Municipal on August 30, 2024 and sell it today you would earn a total of 555.00 from holding First Trust Municipal or generate 12.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Municipal vs. First Trust Ultra
Performance |
| Timeline |
| First Trust Municipal |
| First Trust Ultra |
First Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Trust
The main advantage of trading using opposite First Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. SSGA Active Trust | First Trust vs. SPDR Nuveen Municipal | First Trust vs. iShares Short Maturity | First Trust vs. First Trust Flexible |
| First Trust vs. First Trust Short | First Trust vs. First Trust Municipal | First Trust vs. First Trust Institutional | First Trust vs. JPMorgan Ultra Short Municipal |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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