Correlation Between First Trust and Burney Factor
Can any of the company-specific risk be diversified away by investing in both First Trust and Burney Factor 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 Burney Factor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Growth and Burney Factor Rotation, you can compare the effects of market volatilities on First Trust and Burney Factor 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 Burney Factor. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Burney Factor.
Diversification Opportunities for First Trust and Burney Factor
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Burney is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Growth and Burney Factor Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burney Factor Rotation 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 Growth are associated (or correlated) with Burney Factor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burney Factor Rotation has no effect on the direction of First Trust i.e., First Trust and Burney Factor go up and down completely randomly.
Pair Corralation between First Trust and Burney Factor
Given the investment horizon of 90 days First Trust is expected to generate 1.04 times less return on investment than Burney Factor. In addition to that, First Trust is 1.02 times more volatile than Burney Factor Rotation. It trades about 0.1 of its total potential returns per unit of risk. Burney Factor Rotation is currently generating about 0.11 per unit of volatility. If you would invest 2,681 in Burney Factor Rotation on August 27, 2024 and sell it today you would earn a total of 1,615 from holding Burney Factor Rotation or generate 60.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Growth vs. Burney Factor Rotation
Performance |
| Timeline |
| First Trust Growth |
| Burney Factor Rotation |
First Trust and Burney Factor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Burney Factor
The main advantage of trading using opposite First Trust and Burney Factor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Burney Factor 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 Burney Factor will offset losses from the drop in Burney Factor's long position.| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. First Trust Exchange Traded |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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