Correlation Between First Trust and FlexShares Ready
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares Ready 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 FlexShares Ready into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and FlexShares Ready Access, you can compare the effects of market volatilities on First Trust and FlexShares Ready 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 FlexShares Ready. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Ready.
Diversification Opportunities for First Trust and FlexShares Ready
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and FlexShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and FlexShares Ready Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Ready Access 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 Senior are associated (or correlated) with FlexShares Ready. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Ready Access has no effect on the direction of First Trust i.e., First Trust and FlexShares Ready go up and down completely randomly.
Pair Corralation between First Trust and FlexShares Ready
Given the investment horizon of 90 days First Trust Senior is expected to generate 7.73 times more return on investment than FlexShares Ready. However, First Trust is 7.73 times more volatile than FlexShares Ready Access. It trades about 0.17 of its potential returns per unit of risk. FlexShares Ready Access is currently generating about 0.85 per unit of risk. If you would invest 4,601 in First Trust Senior on August 28, 2024 and sell it today you would earn a total of 28.00 from holding First Trust Senior or generate 0.61% 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 Senior vs. FlexShares Ready Access
Performance |
| Timeline |
| First Trust Senior |
| FlexShares Ready Access |
First Trust and FlexShares Ready Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares Ready
The main advantage of trading using opposite First Trust and FlexShares Ready positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares Ready 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 FlexShares Ready will offset losses from the drop in FlexShares Ready's long position.| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
| FlexShares Ready vs. SPDR SSgA Ultra | FlexShares Ready vs. FlexShares iBoxx 3 Year | FlexShares Ready vs. FlexShares iBoxx 5 Year | FlexShares Ready vs. PIMCO Enhanced Low |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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