Correlation Between First Trust and ETF Series
Can any of the company-specific risk be diversified away by investing in both First Trust and ETF Series 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 ETF Series 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 ETF Series Solutions, you can compare the effects of market volatilities on First Trust and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ETF Series.
Diversification Opportunities for First Trust and ETF Series
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and ETF is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of First Trust i.e., First Trust and ETF Series go up and down completely randomly.
Pair Corralation between First Trust and ETF Series
Allowing for the 90-day total investment horizon First Trust is expected to generate 1.09 times less return on investment than ETF Series. In addition to that, First Trust is 1.19 times more volatile than ETF Series Solutions. It trades about 0.08 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about 0.1 per unit of volatility. If you would invest 2,311 in ETF Series Solutions on August 29, 2024 and sell it today you would earn a total of 1,063 from holding ETF Series Solutions or generate 46.0% 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. ETF Series Solutions
Performance |
| Timeline |
| First Trust Dorsey |
| ETF Series Solutions |
First Trust and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ETF Series
The main advantage of trading using opposite First Trust and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| First Trust vs. Vanguard Mid Cap Index | First Trust vs. iShares Core SP | First Trust vs. SPDR SP MIDCAP | First Trust vs. Vanguard SP Mid Cap |
| ETF Series vs. WisdomTree 9060 Balanced | ETF Series vs. RPAR Risk Parity | ETF Series vs. Cambria Tail Risk | ETF Series vs. Aptus Defined Risk |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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