Correlation Between First Trust and Global X
Can any of the company-specific risk be diversified away by investing in both First Trust and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Global X Dow, you can compare the effects of market volatilities on First Trust and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Global X.
Diversification Opportunities for First Trust and Global X
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Global X Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Dow 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 Dorsey are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Dow has no effect on the direction of First Trust i.e., First Trust and Global X go up and down completely randomly.
Pair Corralation between First Trust and Global X
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 2.25 times more return on investment than Global X. However, First Trust is 2.25 times more volatile than Global X Dow. It trades about 0.12 of its potential returns per unit of risk. Global X Dow is currently generating about 0.17 per unit of risk. If you would invest 5,484 in First Trust Dorsey on November 2, 2024 and sell it today you would earn a total of 778.00 from holding First Trust Dorsey or generate 14.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. Global X Dow
Performance |
| Timeline |
| First Trust Dorsey |
| Global X Dow |
First Trust and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Global X
The main advantage of trading using opposite First Trust and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| Global X vs. Global X SP | Global X vs. Global X Russell | Global X vs. Global X SP | Global X vs. Global X Nasdaq |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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