Correlation Between First Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both First Trust and First Trust 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 First Trust 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 First Trust SMID, you can compare the effects of market volatilities on First Trust and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Trust.
Diversification Opportunities for First Trust and First Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of First Trust i.e., First Trust and First Trust go up and down completely randomly.
Pair Corralation between First Trust and First Trust
Considering the 90-day investment horizon First Trust is expected to generate 1.4 times less return on investment than First Trust. But when comparing it to its historical volatility, First Trust Value is 2.2 times less risky than First Trust. It trades about 0.17 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,364 in First Trust SMID on September 1, 2024 and sell it today you would earn a total of 631.00 from holding First Trust SMID or generate 18.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
First Trust Value vs. First Trust SMID
Performance |
| Timeline |
| First Trust Value |
| First Trust SMID |
First Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Trust
The main advantage of trading using opposite First Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| First Trust vs. First Trust Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
| First Trust vs. First Trust Rising | First Trust vs. First Trust Equity | First Trust vs. First Trust Small | First Trust vs. VictoryShares Small Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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