Correlation Between First Trust and IQ Hedge
Can any of the company-specific risk be diversified away by investing in both First Trust and IQ Hedge 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 IQ Hedge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust BuyWrite and IQ Hedge Multi Strategy, you can compare the effects of market volatilities on First Trust and IQ Hedge 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 IQ Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IQ Hedge.
Diversification Opportunities for First Trust and IQ Hedge
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and QAI is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust BuyWrite and IQ Hedge Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Hedge Multi 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 BuyWrite are associated (or correlated) with IQ Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Hedge Multi has no effect on the direction of First Trust i.e., First Trust and IQ Hedge go up and down completely randomly.
Pair Corralation between First Trust and IQ Hedge
Given the investment horizon of 90 days First Trust BuyWrite is expected to generate 1.73 times more return on investment than IQ Hedge. However, First Trust is 1.73 times more volatile than IQ Hedge Multi Strategy. It trades about 0.13 of its potential returns per unit of risk. IQ Hedge Multi Strategy is currently generating about 0.1 per unit of risk. If you would invest 1,679 in First Trust BuyWrite on August 31, 2024 and sell it today you would earn a total of 699.00 from holding First Trust BuyWrite or generate 41.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust BuyWrite vs. IQ Hedge Multi Strategy
Performance |
| Timeline |
| First Trust BuyWrite |
| IQ Hedge Multi |
First Trust and IQ Hedge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IQ Hedge
The main advantage of trading using opposite First Trust and IQ Hedge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IQ Hedge 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 IQ Hedge will offset losses from the drop in IQ Hedge's long position.| First Trust vs. First Trust Emerging | First Trust vs. First Trust Managed | First Trust vs. First Trust Senior | First Trust vs. First Trust Income |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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