Correlation Between First Trust and ETRACS 2x
Can any of the company-specific risk be diversified away by investing in both First Trust and ETRACS 2x 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 ETRACS 2x 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 ETRACS 2x Leveraged, you can compare the effects of market volatilities on First Trust and ETRACS 2x 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 ETRACS 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ETRACS 2x.
Diversification Opportunities for First Trust and ETRACS 2x
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and ETRACS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and ETRACS 2x Leveraged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2x Leveraged 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 ETRACS 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2x Leveraged has no effect on the direction of First Trust i.e., First Trust and ETRACS 2x go up and down completely randomly.
Pair Corralation between First Trust and ETRACS 2x
Allowing for the 90-day total investment horizon First Trust is expected to generate 1.2 times less return on investment than ETRACS 2x. But when comparing it to its historical volatility, First Trust Dorsey is 1.17 times less risky than ETRACS 2x. It trades about 0.31 of its potential returns per unit of risk. ETRACS 2x Leveraged is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 3,956 in ETRACS 2x Leveraged on September 4, 2024 and sell it today you would earn a total of 359.00 from holding ETRACS 2x Leveraged or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. ETRACS 2x Leveraged
Performance |
| Timeline |
| First Trust Dorsey |
| ETRACS 2x Leveraged |
First Trust and ETRACS 2x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ETRACS 2x
The main advantage of trading using opposite First Trust and ETRACS 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ETRACS 2x 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 ETRACS 2x will offset losses from the drop in ETRACS 2x'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 |
| ETRACS 2x vs. First Trust Dorsey | ETRACS 2x vs. Direxion Daily MSCI | ETRACS 2x vs. MFUT | ETRACS 2x 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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