Correlation Between First Trust and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and Dimensional ETF 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 Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Short and Dimensional ETF Trust, you can compare the effects of market volatilities on First Trust and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Dimensional ETF.
Diversification Opportunities for First Trust and Dimensional ETF
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Dimensional is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Short and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Short are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of First Trust i.e., First Trust and Dimensional ETF go up and down completely randomly.
Pair Corralation between First Trust and Dimensional ETF
Given the investment horizon of 90 days First Trust is expected to generate 1.58 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, First Trust Short is 2.88 times less risky than Dimensional ETF. It trades about 0.13 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,952 in Dimensional ETF Trust on August 26, 2024 and sell it today you would earn a total of 221.00 from holding Dimensional ETF Trust or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Short vs. Dimensional ETF Trust
Performance |
| Timeline |
| First Trust Short |
| Dimensional ETF Trust |
First Trust and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Dimensional ETF
The main advantage of trading using opposite First Trust and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| First Trust vs. First Trust Ultra | First Trust vs. First Trust Municipal | First Trust vs. First Trust Managed | First Trust vs. First Trust Institutional |
| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Core Equity | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Emerging Core |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |