Correlation Between First Trust and Fidelity Covington
Can any of the company-specific risk be diversified away by investing in both First Trust and Fidelity Covington 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 Fidelity Covington 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 Fidelity Covington Trust, you can compare the effects of market volatilities on First Trust and Fidelity Covington 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 Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Fidelity Covington.
Diversification Opportunities for First Trust and Fidelity Covington
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of First Trust i.e., First Trust and Fidelity Covington go up and down completely randomly.
Pair Corralation between First Trust and Fidelity Covington
Allowing for the 90-day total investment horizon First Trust is expected to generate 1.62 times less return on investment than Fidelity Covington. In addition to that, First Trust is 1.35 times more volatile than Fidelity Covington Trust. It trades about 0.13 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.29 per unit of volatility. If you would invest 3,178 in Fidelity Covington Trust on August 26, 2024 and sell it today you would earn a total of 319.00 from holding Fidelity Covington Trust or generate 10.04% 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 Dorsey vs. Fidelity Covington Trust
Performance |
| Timeline |
| First Trust Dorsey |
| Fidelity Covington Trust |
First Trust and Fidelity Covington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Fidelity Covington
The main advantage of trading using opposite First Trust and Fidelity Covington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Fidelity Covington 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 Fidelity Covington will offset losses from the drop in Fidelity Covington'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 |
| Fidelity Covington vs. JPMorgan Fundamental Data | Fidelity Covington vs. Vanguard Mid Cap Index | Fidelity Covington vs. SPDR SP 400 | Fidelity Covington vs. SPDR SP 400 |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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