Correlation Between First Trust and IQ MacKay
Can any of the company-specific risk be diversified away by investing in both First Trust and IQ MacKay 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 IQ MacKay 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 IQ MacKay ESG, you can compare the effects of market volatilities on First Trust and IQ MacKay 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 IQ MacKay. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IQ MacKay.
Diversification Opportunities for First Trust and IQ MacKay
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IQHI is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and IQ MacKay ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay ESG 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 IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay ESG has no effect on the direction of First Trust i.e., First Trust and IQ MacKay go up and down completely randomly.
Pair Corralation between First Trust and IQ MacKay
Given the investment horizon of 90 days First Trust is expected to generate 1.98 times less return on investment than IQ MacKay. But when comparing it to its historical volatility, First Trust Enhanced is 9.24 times less risky than IQ MacKay. It trades about 0.68 of its potential returns per unit of risk. IQ MacKay ESG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,362 in IQ MacKay ESG on August 29, 2024 and sell it today you would earn a total of 329.00 from holding IQ MacKay ESG or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. IQ MacKay ESG
Performance |
| Timeline |
| First Trust Enhanced |
| IQ MacKay ESG |
First Trust and IQ MacKay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IQ MacKay
The main advantage of trading using opposite First Trust and IQ MacKay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IQ MacKay 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 IQ MacKay will offset losses from the drop in IQ MacKay'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 |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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