Correlation Between First Trust and Roundhill Investments
Can any of the company-specific risk be diversified away by investing in both First Trust and Roundhill Investments 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 Roundhill Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Equity and Roundhill Investments, you can compare the effects of market volatilities on First Trust and Roundhill Investments 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 Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Roundhill Investments.
Diversification Opportunities for First Trust and Roundhill Investments
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Roundhill is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Equity and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments 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 Equity are associated (or correlated) with Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of First Trust i.e., First Trust and Roundhill Investments go up and down completely randomly.
Pair Corralation between First Trust and Roundhill Investments
If you would invest 9,962 in First Trust Equity on August 29, 2024 and sell it today you would earn a total of 2,816 from holding First Trust Equity or generate 28.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 0.79% |
| Values | Daily Returns |
First Trust Equity vs. Roundhill Investments
Performance |
| Timeline |
| First Trust Equity |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Trust and Roundhill Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Roundhill Investments
The main advantage of trading using opposite First Trust and Roundhill Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Roundhill Investments 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 Roundhill Investments will offset losses from the drop in Roundhill Investments' long position.| First Trust vs. Invesco SP Spin Off | First Trust vs. Renaissance IPO ETF | First Trust vs. First Trust NYSE | First Trust vs. Invesco BuyBack Achievers |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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