Correlation Between First Trust and Xtrackers USD
Can any of the company-specific risk be diversified away by investing in both First Trust and Xtrackers USD 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 Xtrackers USD 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 Xtrackers USD High, you can compare the effects of market volatilities on First Trust and Xtrackers USD 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 Xtrackers USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Xtrackers USD.
Diversification Opportunities for First Trust and Xtrackers USD
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Xtrackers is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Xtrackers USD High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers USD High 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 Xtrackers USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers USD High has no effect on the direction of First Trust i.e., First Trust and Xtrackers USD go up and down completely randomly.
Pair Corralation between First Trust and Xtrackers USD
Given the investment horizon of 90 days First Trust is expected to generate 2.47 times less return on investment than Xtrackers USD. But when comparing it to its historical volatility, First Trust Enhanced is 6.73 times less risky than Xtrackers USD. It trades about 0.63 of its potential returns per unit of risk. Xtrackers USD High is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,433 in Xtrackers USD High on August 29, 2024 and sell it today you would earn a total of 236.00 from holding Xtrackers USD High or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. Xtrackers USD High
Performance |
| Timeline |
| First Trust Enhanced |
| Xtrackers USD High |
First Trust and Xtrackers USD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Xtrackers USD
The main advantage of trading using opposite First Trust and Xtrackers USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Xtrackers USD 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 Xtrackers USD will offset losses from the drop in Xtrackers USD'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 |
| Xtrackers USD vs. SPDR Bloomberg Emerging | Xtrackers USD vs. iShares Broad USD | Xtrackers USD vs. SPDR Barclays Intermediate | Xtrackers USD vs. Schwab Intermediate Term Treasury |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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