Correlation Between First Trust and Macquarie ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and Macquarie 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 Macquarie ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Energy and Macquarie ETF Trust, you can compare the effects of market volatilities on First Trust and Macquarie 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 Macquarie ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Macquarie ETF.
Diversification Opportunities for First Trust and Macquarie ETF
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Macquarie is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and Macquarie ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie 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 Energy are associated (or correlated) with Macquarie ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie ETF Trust has no effect on the direction of First Trust i.e., First Trust and Macquarie ETF go up and down completely randomly.
Pair Corralation between First Trust and Macquarie ETF
Considering the 90-day investment horizon First Trust is expected to generate 1.36 times less return on investment than Macquarie ETF. But when comparing it to its historical volatility, First Trust Energy is 1.01 times less risky than Macquarie ETF. It trades about 0.02 of its potential returns per unit of risk. Macquarie ETF Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,482 in Macquarie ETF Trust on November 9, 2024 and sell it today you would earn a total of 246.00 from holding Macquarie ETF Trust or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 59.43% |
| Values | Daily Returns |
First Trust Energy vs. Macquarie ETF Trust
Performance |
| Timeline |
| First Trust Energy |
| Macquarie ETF Trust |
First Trust and Macquarie ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Macquarie ETF
The main advantage of trading using opposite First Trust and Macquarie ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Macquarie 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 Macquarie ETF will offset losses from the drop in Macquarie ETF's long position.| First Trust vs. First Trust Materials | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Financials | First Trust vs. First Trust Consumer |
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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 Valuation module to check real value of public entities based on technical and fundamental data.
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