Correlation Between First Trust and FlexShares International
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares International 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 FlexShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SP and FlexShares International Quality, you can compare the effects of market volatilities on First Trust and FlexShares International 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 FlexShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares International.
Diversification Opportunities for First Trust and FlexShares International
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and FlexShares is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SP and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International 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 SP are associated (or correlated) with FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of First Trust i.e., First Trust and FlexShares International go up and down completely randomly.
Pair Corralation between First Trust and FlexShares International
Considering the 90-day investment horizon First Trust SP is expected to generate 0.88 times more return on investment than FlexShares International. However, First Trust SP is 1.13 times less risky than FlexShares International. It trades about 0.31 of its potential returns per unit of risk. FlexShares International Quality is currently generating about -0.06 per unit of risk. If you would invest 2,848 in First Trust SP on September 2, 2024 and sell it today you would earn a total of 155.00 from holding First Trust SP or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SP vs. FlexShares International Quali
Performance |
| Timeline |
| First Trust SP |
| FlexShares International |
First Trust and FlexShares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares International
The main advantage of trading using opposite First Trust and FlexShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares International 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 FlexShares International will offset losses from the drop in FlexShares International's long position.| First Trust vs. Invesco Active Real | First Trust vs. First Trust Consumer | First Trust vs. First Trust Utilities | First Trust vs. iShares Residential and |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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