Correlation Between First Trust and WisdomTree MidCap
Can any of the company-specific risk be diversified away by investing in both First Trust and WisdomTree MidCap 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 WisdomTree MidCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Small and WisdomTree MidCap Dividend, you can compare the effects of market volatilities on First Trust and WisdomTree MidCap 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 WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree MidCap.
Diversification Opportunities for First Trust and WisdomTree MidCap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and WisdomTree is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Small and WisdomTree MidCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap 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 Small are associated (or correlated) with WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of First Trust i.e., First Trust and WisdomTree MidCap go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree MidCap
Considering the 90-day investment horizon First Trust Small is expected to generate 1.25 times more return on investment than WisdomTree MidCap. However, First Trust is 1.25 times more volatile than WisdomTree MidCap Dividend. It trades about 0.07 of its potential returns per unit of risk. WisdomTree MidCap Dividend is currently generating about 0.07 per unit of risk. If you would invest 5,629 in First Trust Small on August 27, 2024 and sell it today you would earn a total of 2,691 from holding First Trust Small or generate 47.81% 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 Small vs. WisdomTree MidCap Dividend
Performance |
| Timeline |
| First Trust Small |
| WisdomTree MidCap |
First Trust and WisdomTree MidCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree MidCap
The main advantage of trading using opposite First Trust and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WisdomTree MidCap 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 WisdomTree MidCap will offset losses from the drop in WisdomTree MidCap's long position.| First Trust vs. Invesco DWA Momentum | First Trust vs. Invesco DWA Developed | First Trust vs. Invesco DWA Emerging | First Trust vs. First Trust Small |
| WisdomTree MidCap vs. JPMorgan Fundamental Data | WisdomTree MidCap vs. Vanguard Mid Cap Index | WisdomTree MidCap vs. SPDR SP 400 | WisdomTree MidCap vs. SPDR SP 400 |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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