Correlation Between First Trust and Putnam ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and Putnam 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 Putnam ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Financials and Putnam ETF Trust, you can compare the effects of market volatilities on First Trust and Putnam 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 Putnam ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Putnam ETF.
Diversification Opportunities for First Trust and Putnam ETF
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Putnam is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Financials and Putnam ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam 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 Financials are associated (or correlated) with Putnam ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam ETF Trust has no effect on the direction of First Trust i.e., First Trust and Putnam ETF go up and down completely randomly.
Pair Corralation between First Trust and Putnam ETF
Considering the 90-day investment horizon First Trust Financials is expected to generate 1.6 times more return on investment than Putnam ETF. However, First Trust is 1.6 times more volatile than Putnam ETF Trust. It trades about 0.07 of its potential returns per unit of risk. Putnam ETF Trust is currently generating about 0.1 per unit of risk. If you would invest 3,966 in First Trust Financials on August 30, 2024 and sell it today you would earn a total of 1,927 from holding First Trust Financials or generate 48.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Financials vs. Putnam ETF Trust
Performance |
| Timeline |
| First Trust Financials |
| Putnam ETF Trust |
First Trust and Putnam ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Putnam ETF
The main advantage of trading using opposite First Trust and Putnam ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Putnam 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 Putnam ETF will offset losses from the drop in Putnam ETF's long position.| First Trust vs. Vanguard Industrials Index | First Trust vs. Vanguard Consumer Discretionary | First Trust vs. Vanguard Materials Index | First Trust vs. Vanguard Health Care |
| Putnam ETF vs. Putnam Sustainable Future | Putnam ETF vs. Putnam Sustainable Leaders | Putnam ETF vs. Putnam Focused Large | Putnam ETF vs. Putnam Biorevolution ETF |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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