Correlation Between First Trust and AB Disruptors
Can any of the company-specific risk be diversified away by investing in both First Trust and AB Disruptors 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 Disruptors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust International and AB Disruptors ETF, you can compare the effects of market volatilities on First Trust and AB Disruptors 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 Disruptors. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AB Disruptors.
Diversification Opportunities for First Trust and AB Disruptors
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and FWD is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust International and AB Disruptors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Disruptors ETF 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 International are associated (or correlated) with AB Disruptors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Disruptors ETF has no effect on the direction of First Trust i.e., First Trust and AB Disruptors go up and down completely randomly.
Pair Corralation between First Trust and AB Disruptors
Given the investment horizon of 90 days First Trust is expected to generate 2.42 times less return on investment than AB Disruptors. But when comparing it to its historical volatility, First Trust International is 1.27 times less risky than AB Disruptors. It trades about 0.1 of its potential returns per unit of risk. AB Disruptors ETF is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 7,889 in AB Disruptors ETF on August 24, 2024 and sell it today you would earn a total of 456.00 from holding AB Disruptors ETF or generate 5.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust International vs. AB Disruptors ETF
Performance |
| Timeline |
| First Trust International |
| AB Disruptors ETF |
First Trust and AB Disruptors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AB Disruptors
The main advantage of trading using opposite First Trust and AB Disruptors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AB Disruptors 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 Disruptors will offset losses from the drop in AB Disruptors' long position.| First Trust vs. First Trust Mid | First Trust vs. First Trust Emerging | First Trust vs. First Trust Emerging | First Trust vs. First Trust SSI |
| AB Disruptors vs. Principal Quality ETF | AB Disruptors vs. First Trust International | AB Disruptors vs. First Trust Eurozone | AB Disruptors vs. Global X Millennials |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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