Correlation Between IQ 50 and First Trust
Can any of the company-specific risk be diversified away by investing in both IQ 50 and First Trust 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 IQ 50 and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IQ 50 Percent and First Trust RiverFront, you can compare the effects of market volatilities on IQ 50 and First Trust 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 IQ 50 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ 50 and First Trust.
Diversification Opportunities for IQ 50 and First Trust
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HFXI and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IQ 50 Percent and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront and IQ 50 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 IQ 50 Percent are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust RiverFront has no effect on the direction of IQ 50 i.e., IQ 50 and First Trust go up and down completely randomly.
Pair Corralation between IQ 50 and First Trust
Given the investment horizon of 90 days IQ 50 Percent is expected to generate 0.7 times more return on investment than First Trust. However, IQ 50 Percent is 1.43 times less risky than First Trust. It trades about -0.03 of its potential returns per unit of risk. First Trust RiverFront is currently generating about -0.07 per unit of risk. If you would invest 2,676 in IQ 50 Percent on September 2, 2024 and sell it today you would lose (12.00) from holding IQ 50 Percent or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IQ 50 Percent vs. First Trust RiverFront
Performance |
| Timeline |
| IQ 50 Percent |
| First Trust RiverFront |
IQ 50 and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IQ 50 and First Trust
The main advantage of trading using opposite IQ 50 and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQ 50 position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| IQ 50 vs. iShares Currency Hedged | IQ 50 vs. Xtrackers MSCI All | IQ 50 vs. iShares Currency Hedged | IQ 50 vs. WisdomTree International Hedged |
| First Trust vs. First Trust RiverFront | First Trust vs. First Trust RiverFront | First Trust vs. First Trust Emerging | First Trust vs. First Trust Emerging |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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