Correlation Between First Trust and FT Vest
Can any of the company-specific risk be diversified away by investing in both First Trust and FT Vest 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 FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SMID and FT Vest Equity, you can compare the effects of market volatilities on First Trust and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FT Vest.
Diversification Opportunities for First Trust and FT Vest
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and DHDG is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity 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 SMID are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of First Trust i.e., First Trust and FT Vest go up and down completely randomly.
Pair Corralation between First Trust and FT Vest
Given the investment horizon of 90 days First Trust SMID is expected to generate 2.4 times more return on investment than FT Vest. However, First Trust is 2.4 times more volatile than FT Vest Equity. It trades about 0.12 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.18 per unit of risk. If you would invest 2,892 in First Trust SMID on September 2, 2024 and sell it today you would earn a total of 932.00 from holding First Trust SMID or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 12.1% |
| Values | Daily Returns |
First Trust SMID vs. FT Vest Equity
Performance |
| Timeline |
| First Trust SMID |
| FT Vest Equity |
First Trust and FT Vest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FT Vest
The main advantage of trading using opposite First Trust and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FT Vest 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 FT Vest will offset losses from the drop in FT Vest's long position.| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. Matthews China Discovery |
| FT Vest vs. Northern Lights | FT Vest vs. Dimensional International High | FT Vest vs. Matthews China Discovery | FT Vest vs. Davis Select International |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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