Correlation Between First Trust and FlexShares High
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares High 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 FlexShares High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Tactical and FlexShares High Yield, you can compare the effects of market volatilities on First Trust and FlexShares High 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 FlexShares High. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares High.
Diversification Opportunities for First Trust and FlexShares High
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and FlexShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Tactical and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield 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 Tactical are associated (or correlated) with FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of First Trust i.e., First Trust and FlexShares High go up and down completely randomly.
Pair Corralation between First Trust and FlexShares High
Given the investment horizon of 90 days First Trust is expected to generate 1.12 times less return on investment than FlexShares High. But when comparing it to its historical volatility, First Trust Tactical is 1.04 times less risky than FlexShares High. It trades about 0.21 of its potential returns per unit of risk. FlexShares High Yield is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,906 in FlexShares High Yield on September 1, 2024 and sell it today you would earn a total of 245.00 from holding FlexShares High Yield or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
First Trust Tactical vs. FlexShares High Yield
Performance |
| Timeline |
| First Trust Tactical |
| FlexShares High Yield |
First Trust and FlexShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares High
The main advantage of trading using opposite First Trust and FlexShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares High 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 FlexShares High will offset losses from the drop in FlexShares High's long position.| First Trust vs. First Trust Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust TCW |
| FlexShares High vs. Xtrackers High Beta | FlexShares High vs. iShares Edge High | FlexShares High vs. Xtrackers USD High | FlexShares High vs. iShares Interest Rate |
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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