Correlation Between Xtrackers USD and First Trust
Can any of the company-specific risk be diversified away by investing in both Xtrackers USD 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 Xtrackers USD and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers USD High and First Trust Dow, you can compare the effects of market volatilities on Xtrackers USD 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 Xtrackers USD with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers USD and First Trust.
Diversification Opportunities for Xtrackers USD and First Trust
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Xtrackers and First is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD High and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Xtrackers USD 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 Xtrackers USD High 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 Dow has no effect on the direction of Xtrackers USD i.e., Xtrackers USD and First Trust go up and down completely randomly.
Pair Corralation between Xtrackers USD and First Trust
Given the investment horizon of 90 days Xtrackers USD is expected to generate 1.48 times less return on investment than First Trust. But when comparing it to its historical volatility, Xtrackers USD High is 2.75 times less risky than First Trust. It trades about 0.15 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,038 in First Trust Dow on August 27, 2024 and sell it today you would earn a total of 325.00 from holding First Trust Dow or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers USD High vs. First Trust Dow
Performance |
| Timeline |
| Xtrackers USD High |
| First Trust Dow |
Xtrackers USD and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers USD and First Trust
The main advantage of trading using opposite Xtrackers USD and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers USD 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.| Xtrackers USD vs. First Trust Senior | Xtrackers USD vs. First Trust Low | Xtrackers USD vs. First Trust Enhanced | Xtrackers USD vs. First Trust TCW |
| First Trust vs. First Trust STOXX | First Trust vs. First Trust Morningstar | First Trust vs. SPDR SP International | First Trust vs. WisdomTree International High |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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