Correlation Between BetaPro SP and First Trust
Can any of the company-specific risk be diversified away by investing in both BetaPro SP 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 BetaPro SP and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaPro SP 500 and First Trust Senior, you can compare the effects of market volatilities on BetaPro SP 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 BetaPro SP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and First Trust.
Diversification Opportunities for BetaPro SP and First Trust
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BetaPro and First is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and BetaPro SP 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 BetaPro SP 500 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 Senior has no effect on the direction of BetaPro SP i.e., BetaPro SP and First Trust go up and down completely randomly.
Pair Corralation between BetaPro SP and First Trust
Assuming the 90 days trading horizon BetaPro SP 500 is expected to under-perform the First Trust. In addition to that, BetaPro SP is 2.09 times more volatile than First Trust Senior. It trades about -0.12 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.1 per unit of volatility. If you would invest 1,576 in First Trust Senior on September 2, 2024 and sell it today you would earn a total of 138.00 from holding First Trust Senior or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaPro SP 500 vs. First Trust Senior
Performance |
| Timeline |
| BetaPro SP 500 |
| First Trust Senior |
BetaPro SP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaPro SP and First Trust
The main advantage of trading using opposite BetaPro SP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP 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.| BetaPro SP vs. BetaPro SPTSX 60 | BetaPro SP vs. BetaPro NASDAQ 100 2x | BetaPro SP vs. BetaPro SP 500 | BetaPro SP vs. BetaPro Gold Bullion |
| First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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