Correlation Between First Trust and US Small
Can any of the company-specific risk be diversified away by investing in both First Trust and US Small 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 US Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Mid and US Small Cap, you can compare the effects of market volatilities on First Trust and US Small 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 US Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and US Small.
Diversification Opportunities for First Trust and US Small
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and RUSC is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mid and US Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Small Cap 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 Mid are associated (or correlated) with US Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Small Cap has no effect on the direction of First Trust i.e., First Trust and US Small go up and down completely randomly.
Pair Corralation between First Trust and US Small
Considering the 90-day investment horizon First Trust is expected to generate 1.1 times less return on investment than US Small. But when comparing it to its historical volatility, First Trust Mid is 1.09 times less risky than US Small. It trades about 0.15 of its potential returns per unit of risk. US Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,075 in US Small Cap on December 1, 2025 and sell it today you would earn a total of 291.00 from holding US Small Cap or generate 9.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Mid vs. US Small Cap
Performance |
| Timeline |
| First Trust Mid |
| US Small Cap |
First Trust and US Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and US Small
The main advantage of trading using opposite First Trust and US Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, US Small 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 US Small will offset losses from the drop in US Small's long position.| First Trust vs. First Trust Japan | First Trust vs. First Trust Materials | First Trust vs. First Trust Small | First Trust vs. iShares Intl High |
| US Small vs. iShares MSCI Germany | US Small vs. First Trust LongShort | US Small vs. Fidelity MSCI Utilities | US Small vs. iShares MSCI Mexico |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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