Correlation Between First Trust and Defiance Nasdaq
Can any of the company-specific risk be diversified away by investing in both First Trust and Defiance Nasdaq 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 Defiance Nasdaq 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 Defiance Nasdaq 100, you can compare the effects of market volatilities on First Trust and Defiance Nasdaq 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 Defiance Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Defiance Nasdaq.
Diversification Opportunities for First Trust and Defiance Nasdaq
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Defiance is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Defiance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Nasdaq 100 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 Defiance Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Nasdaq 100 has no effect on the direction of First Trust i.e., First Trust and Defiance Nasdaq go up and down completely randomly.
Pair Corralation between First Trust and Defiance Nasdaq
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 1.63 times more return on investment than Defiance Nasdaq. However, First Trust is 1.63 times more volatile than Defiance Nasdaq 100. It trades about 0.31 of its potential returns per unit of risk. Defiance Nasdaq 100 is currently generating about 0.24 per unit of risk. If you would invest 5,777 in First Trust Dorsey on September 4, 2024 and sell it today you would earn a total of 434.00 from holding First Trust Dorsey or generate 7.51% 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. Defiance Nasdaq 100
Performance |
| Timeline |
| First Trust Dorsey |
| Defiance Nasdaq 100 |
First Trust and Defiance Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Defiance Nasdaq
The main advantage of trading using opposite First Trust and Defiance Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Defiance Nasdaq 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 Defiance Nasdaq will offset losses from the drop in Defiance Nasdaq'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 |
| Defiance Nasdaq vs. First Trust Dorsey | Defiance Nasdaq vs. Direxion Daily MSCI | Defiance Nasdaq vs. MFUT | Defiance Nasdaq vs. VanEck Morningstar Wide |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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