Correlation Between First Trust and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares Quality 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 Quality 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 Quality Dividend, you can compare the effects of market volatilities on First Trust and FlexShares Quality 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 Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Quality.
Diversification Opportunities for First Trust and FlexShares Quality
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and FlexShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SP and FlexShares Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality 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 Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality has no effect on the direction of First Trust i.e., First Trust and FlexShares Quality go up and down completely randomly.
Pair Corralation between First Trust and FlexShares Quality
Considering the 90-day investment horizon First Trust is expected to generate 1.26 times less return on investment than FlexShares Quality. In addition to that, First Trust is 1.7 times more volatile than FlexShares Quality Dividend. It trades about 0.07 of its total potential returns per unit of risk. FlexShares Quality Dividend is currently generating about 0.14 per unit of volatility. If you would invest 5,324 in FlexShares Quality Dividend on September 2, 2024 and sell it today you would earn a total of 2,047 from holding FlexShares Quality Dividend or generate 38.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SP vs. FlexShares Quality Dividend
Performance |
| Timeline |
| First Trust SP |
| FlexShares Quality |
First Trust and FlexShares Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares Quality
The main advantage of trading using opposite First Trust and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares Quality 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 Quality will offset losses from the drop in FlexShares Quality'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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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