Correlation Between Financial and First Trust
Can any of the company-specific risk be diversified away by investing in both Financial and First Trust 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 Financial and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and First Trust Cboe, you can compare the effects of market volatilities on Financial and First Trust 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 Financial with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and First Trust.
Diversification Opportunities for Financial and First Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Financial 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 Financial 15 Split are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Cboe has no effect on the direction of Financial i.e., Financial and First Trust go up and down completely randomly.
Pair Corralation between Financial and First Trust
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 5.69 times more return on investment than First Trust. However, Financial is 5.69 times more volatile than First Trust Cboe. It trades about 0.46 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.31 per unit of risk. If you would invest 874.00 in Financial 15 Split on August 25, 2024 and sell it today you would earn a total of 128.00 from holding Financial 15 Split or generate 14.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Financial 15 Split vs. First Trust Cboe
Performance |
| Timeline |
| Financial 15 Split |
| First Trust Cboe |
Financial and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and First Trust
The main advantage of trading using opposite Financial and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, First Trust 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 Trust will offset losses from the drop in First Trust's long position.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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