Correlation Between First Trust and KFA Mount
Can any of the company-specific risk be diversified away by investing in both First Trust and KFA Mount 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 KFA Mount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust LongShort and KFA Mount Lucas, you can compare the effects of market volatilities on First Trust and KFA Mount 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 KFA Mount. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and KFA Mount.
Diversification Opportunities for First Trust and KFA Mount
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and KFA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas 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 LongShort are associated (or correlated) with KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of First Trust i.e., First Trust and KFA Mount go up and down completely randomly.
Pair Corralation between First Trust and KFA Mount
Given the investment horizon of 90 days First Trust LongShort is expected to generate 0.93 times more return on investment than KFA Mount. However, First Trust LongShort is 1.07 times less risky than KFA Mount. It trades about 0.16 of its potential returns per unit of risk. KFA Mount Lucas is currently generating about -0.17 per unit of risk. If you would invest 6,452 in First Trust LongShort on August 27, 2024 and sell it today you would earn a total of 111.00 from holding First Trust LongShort or generate 1.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust LongShort vs. KFA Mount Lucas
Performance |
| Timeline |
| First Trust LongShort |
| KFA Mount Lucas |
First Trust and KFA Mount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and KFA Mount
The main advantage of trading using opposite First Trust and KFA Mount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, KFA Mount 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 KFA Mount will offset losses from the drop in KFA Mount's long position.| First Trust vs. First Trust Managed | First Trust vs. IQ Hedge Multi Strategy | First Trust vs. First Trust BuyWrite | First Trust vs. SPDR SSgA Global |
| KFA Mount vs. iMGP DBi Managed | KFA Mount vs. Simplify Exchange Traded | KFA Mount vs. Simplify Interest Rate | KFA Mount vs. AGFiQ Market Neutral |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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