Correlation Between First Trust and AdvisorShares Restaurant
Can any of the company-specific risk be diversified away by investing in both First Trust and AdvisorShares Restaurant 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 AdvisorShares Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Consumer and AdvisorShares Restaurant ETF, you can compare the effects of market volatilities on First Trust and AdvisorShares Restaurant 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 AdvisorShares Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AdvisorShares Restaurant.
Diversification Opportunities for First Trust and AdvisorShares Restaurant
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and AdvisorShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer and AdvisorShares Restaurant ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Restaurant 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 Consumer are associated (or correlated) with AdvisorShares Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Restaurant has no effect on the direction of First Trust i.e., First Trust and AdvisorShares Restaurant go up and down completely randomly.
Pair Corralation between First Trust and AdvisorShares Restaurant
Considering the 90-day investment horizon First Trust is expected to generate 1.12 times less return on investment than AdvisorShares Restaurant. But when comparing it to its historical volatility, First Trust Consumer is 1.34 times less risky than AdvisorShares Restaurant. It trades about 0.4 of its potential returns per unit of risk. AdvisorShares Restaurant ETF is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,703 in AdvisorShares Restaurant ETF on September 5, 2024 and sell it today you would earn a total of 265.00 from holding AdvisorShares Restaurant ETF or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Consumer vs. AdvisorShares Restaurant ETF
Performance |
| Timeline |
| First Trust Consumer |
| AdvisorShares Restaurant |
First Trust and AdvisorShares Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AdvisorShares Restaurant
The main advantage of trading using opposite First Trust and AdvisorShares Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AdvisorShares Restaurant 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 AdvisorShares Restaurant will offset losses from the drop in AdvisorShares Restaurant's long position.| First Trust vs. Smith Nephew SNATS | First Trust vs. Fresenius Medical Care | First Trust vs. Fomento Economico Mexicano | First Trust vs. The Cooper Companies, |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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