Correlation Between First Trust and First Asset
Can any of the company-specific risk be diversified away by investing in both First Trust and First Asset 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 First Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and First Asset Tech, you can compare the effects of market volatilities on First Trust and First Asset 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 First Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Asset.
Diversification Opportunities for First Trust and First Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and First Asset Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Tech 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 Senior are associated (or correlated) with First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Tech has no effect on the direction of First Trust i.e., First Trust and First Asset go up and down completely randomly.
Pair Corralation between First Trust and First Asset
Assuming the 90 days trading horizon First Trust is expected to generate 1.23 times less return on investment than First Asset. But when comparing it to its historical volatility, First Trust Senior is 1.65 times less risky than First Asset. It trades about 0.06 of its potential returns per unit of risk. First Asset Tech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,139 in First Asset Tech on August 25, 2024 and sell it today you would earn a total of 44.00 from holding First Asset Tech or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. First Asset Tech
Performance |
| Timeline |
| First Trust Senior |
| First Asset Tech |
First Trust and First Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Asset
The main advantage of trading using opposite First Trust and First Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, First Asset 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 First Asset will offset losses from the drop in First Asset's long position.| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
| First Asset vs. iShares SPTSX Capped | First Asset vs. BMO Equal Weight | First Asset vs. BMO SPTSX Equal | First Asset vs. BMO Equal Weight |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |