Correlation Between First Trust and WisdomTree Natural
Can any of the company-specific risk be diversified away by investing in both First Trust and WisdomTree Natural 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 WisdomTree Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and WisdomTree Natural Gas, you can compare the effects of market volatilities on First Trust and WisdomTree Natural 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 WisdomTree Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Natural.
Diversification Opportunities for First Trust and WisdomTree Natural
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and WisdomTree is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas 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 Value are associated (or correlated) with WisdomTree Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of First Trust i.e., First Trust and WisdomTree Natural go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Natural
Assuming the 90 days trading horizon First Trust Value is expected to generate 0.06 times more return on investment than WisdomTree Natural. However, First Trust Value is 16.57 times less risky than WisdomTree Natural. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Natural Gas is currently generating about -0.01 per unit of risk. If you would invest 2,299 in First Trust Value on September 4, 2024 and sell it today you would earn a total of 455.00 from holding First Trust Value or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Value vs. WisdomTree Natural Gas
Performance |
| Timeline |
| First Trust Value |
| WisdomTree Natural Gas |
First Trust and WisdomTree Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Natural
The main advantage of trading using opposite First Trust and WisdomTree Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WisdomTree Natural 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 WisdomTree Natural will offset losses from the drop in WisdomTree Natural's long position.| First Trust vs. First Trust Large | First Trust vs. First Trust Capital | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Eurozone |
| WisdomTree Natural vs. WisdomTree Zinc | WisdomTree Natural vs. WisdomTree Brent Crude | WisdomTree Natural vs. WisdomTree Aluminium 2x | WisdomTree Natural vs. WisdomTree Enhanced Commodity |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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