Correlation Between First Trust and USCF ETF

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Can any of the company-specific risk be diversified away by investing in both First Trust and USCF ETF 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 USCF ETF 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 USCF ETF Trust, you can compare the effects of market volatilities on First Trust and USCF ETF 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 USCF ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and USCF ETF.

Diversification Opportunities for First Trust and USCF ETF

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between First and USCF is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and USCF ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF ETF Trust 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 USCF ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF ETF Trust has no effect on the direction of First Trust i.e., First Trust and USCF ETF go up and down completely randomly.

Pair Corralation between First Trust and USCF ETF

Considering the 90-day investment horizon First Trust is expected to generate 1.02 times less return on investment than USCF ETF. But when comparing it to its historical volatility, First Trust Value is 1.59 times less risky than USCF ETF. It trades about 0.34 of its potential returns per unit of risk. USCF ETF Trust is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,992  in USCF ETF Trust on September 1, 2024 and sell it today you would earn a total of  146.00  from holding USCF ETF Trust or generate 4.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

First Trust Value  vs.  USCF ETF Trust

 Performance 
       Timeline  
First Trust Value 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Value are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
USCF ETF Trust 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in USCF ETF Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, USCF ETF may actually be approaching a critical reversion point that can send shares even higher in December 2024.

First Trust and USCF ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and USCF ETF

The main advantage of trading using opposite First Trust and USCF ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, USCF ETF 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 USCF ETF will offset losses from the drop in USCF ETF's long position.
The idea behind First Trust Value and USCF ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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