Correlation Between First Trust and T REX
Can any of the company-specific risk be diversified away by investing in both First Trust and T REX 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 T REX 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 T REX 2X Long, you can compare the effects of market volatilities on First Trust and T REX 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 T REX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and T REX.
Diversification Opportunities for First Trust and T REX
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and TSLT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and T REX 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T REX 2X 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 T REX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T REX 2X has no effect on the direction of First Trust i.e., First Trust and T REX go up and down completely randomly.
Pair Corralation between First Trust and T REX
Allowing for the 90-day total investment horizon First Trust is expected to generate 7.66 times less return on investment than T REX. But when comparing it to its historical volatility, First Trust Dorsey is 6.93 times less risky than T REX. It trades about 0.13 of its potential returns per unit of risk. T REX 2X Long is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,174 in T REX 2X Long on November 3, 2024 and sell it today you would earn a total of 2,481 from holding T REX 2X Long or generate 211.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. T REX 2X Long
Performance |
| Timeline |
| First Trust Dorsey |
| T REX 2X |
First Trust and T REX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and T REX
The main advantage of trading using opposite First Trust and T REX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, T REX 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 T REX will offset losses from the drop in T REX'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 |
| T REX vs. Tidal Trust II | T REX vs. Tidal Trust II | T REX vs. Direxion Daily META | T REX vs. Direxion Daily META |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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