Correlation Between FlexShares Credit and First Trust
Can any of the company-specific risk be diversified away by investing in both FlexShares Credit 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 FlexShares Credit and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Credit Scored Long and First Trust RiverFront, you can compare the effects of market volatilities on FlexShares Credit 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 FlexShares Credit with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Credit and First Trust.
Diversification Opportunities for FlexShares Credit and First Trust
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FlexShares and First is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Credit Scored Long 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 FlexShares Credit 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 FlexShares Credit Scored Long 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 FlexShares Credit i.e., FlexShares Credit and First Trust go up and down completely randomly.
Pair Corralation between FlexShares Credit and First Trust
Given the investment horizon of 90 days FlexShares Credit Scored Long is expected to generate 1.01 times more return on investment than First Trust. However, FlexShares Credit is 1.01 times more volatile than First Trust RiverFront. It trades about 0.14 of its potential returns per unit of risk. First Trust RiverFront is currently generating about -0.05 per unit of risk. If you would invest 4,319 in FlexShares Credit Scored Long on September 1, 2024 and sell it today you would earn a total of 107.00 from holding FlexShares Credit Scored Long or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
FlexShares Credit Scored Long vs. First Trust RiverFront
Performance |
| Timeline |
| FlexShares Credit |
| First Trust RiverFront |
FlexShares Credit and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Credit and First Trust
The main advantage of trading using opposite FlexShares Credit and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Credit 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.| FlexShares Credit vs. SPDR Barclays Long | FlexShares Credit vs. FlexShares Credit Scored Corporate | FlexShares Credit vs. FlexShares Disciplined Duration | FlexShares Credit vs. FlexShares Quality Large |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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