Correlation Between IQ MacKay and First Trust
Can any of the company-specific risk be diversified away by investing in both IQ MacKay 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 MacKay 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 MacKay ESG and First Trust Senior, you can compare the effects of market volatilities on IQ MacKay 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 MacKay with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ MacKay and First Trust.
Diversification Opportunities for IQ MacKay and First Trust
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IQHI and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding IQ MacKay ESG 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 IQ MacKay 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 MacKay ESG 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 IQ MacKay i.e., IQ MacKay and First Trust go up and down completely randomly.
Pair Corralation between IQ MacKay and First Trust
Given the investment horizon of 90 days IQ MacKay ESG is expected to generate 1.33 times more return on investment than First Trust. However, IQ MacKay is 1.33 times more volatile than First Trust Senior. It trades about 0.24 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.16 per unit of risk. If you would invest 2,660 in IQ MacKay ESG on August 29, 2024 and sell it today you would earn a total of 31.00 from holding IQ MacKay ESG or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IQ MacKay ESG vs. First Trust Senior
Performance |
| Timeline |
| IQ MacKay ESG |
| First Trust Senior |
IQ MacKay and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IQ MacKay and First Trust
The main advantage of trading using opposite IQ MacKay and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQ MacKay 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.The idea behind IQ MacKay ESG and First Trust Senior pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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