Correlation Between First Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Ultra and First Trust Low, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Trust.
Diversification Opportunities for First Trust and First Trust
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and First is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Ultra and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low 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 Ultra 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 Low has no effect on the direction of First Trust i.e., First Trust and First Trust go up and down completely randomly.
Pair Corralation between First Trust and First Trust
Given the investment horizon of 90 days First Trust is expected to generate 2.25 times less return on investment than First Trust. But when comparing it to its historical volatility, First Trust Ultra is 2.15 times less risky than First Trust. It trades about 0.16 of its potential returns per unit of risk. First Trust Low is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,832 in First Trust Low on September 1, 2024 and sell it today you would earn a total of 61.00 from holding First Trust Low or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Ultra vs. First Trust Low
Performance |
| Timeline |
| First Trust Ultra |
| First Trust Low |
First Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Trust
The main advantage of trading using opposite First Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Short | First Trust vs. First Trust Municipal | First Trust vs. First Trust Institutional | First Trust vs. JPMorgan Ultra Short Municipal |
| First Trust vs. Vanguard Intermediate Term Corporate | First Trust vs. Vanguard Short Term Bond | First Trust vs. Vanguard Long Term Corporate | First Trust vs. Vanguard Short 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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