Correlation Between First Trust and BlackRock AAA
Can any of the company-specific risk be diversified away by investing in both First Trust and BlackRock AAA 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 BlackRock AAA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and BlackRock AAA CLO, you can compare the effects of market volatilities on First Trust and BlackRock AAA 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 BlackRock AAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BlackRock AAA.
Diversification Opportunities for First Trust and BlackRock AAA
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and BlackRock is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and BlackRock AAA CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock AAA CLO 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 Enhanced are associated (or correlated) with BlackRock AAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock AAA CLO has no effect on the direction of First Trust i.e., First Trust and BlackRock AAA go up and down completely randomly.
Pair Corralation between First Trust and BlackRock AAA
Given the investment horizon of 90 days First Trust is expected to generate 1.98 times less return on investment than BlackRock AAA. But when comparing it to its historical volatility, First Trust Enhanced is 2.15 times less risky than BlackRock AAA. It trades about 0.45 of its potential returns per unit of risk. BlackRock AAA CLO is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 5,164 in BlackRock AAA CLO on August 24, 2024 and sell it today you would earn a total of 29.00 from holding BlackRock AAA CLO or generate 0.56% 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 Enhanced vs. BlackRock AAA CLO
Performance |
| Timeline |
| First Trust Enhanced |
| BlackRock AAA CLO |
First Trust and BlackRock AAA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and BlackRock AAA
The main advantage of trading using opposite First Trust and BlackRock AAA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BlackRock AAA 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 BlackRock AAA will offset losses from the drop in BlackRock AAA's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| BlackRock AAA vs. SPDR Bloomberg 1 3 | BlackRock AAA vs. iShares Ultra Short Term | BlackRock AAA vs. First Trust Enhanced | BlackRock AAA vs. iShares 0 3 Month |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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