Correlation Between First Trust and Xtrackers Short
Can any of the company-specific risk be diversified away by investing in both First Trust and Xtrackers Short 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 Xtrackers Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Low and Xtrackers Short Duration, you can compare the effects of market volatilities on First Trust and Xtrackers Short 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 Xtrackers Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Xtrackers Short.
Diversification Opportunities for First Trust and Xtrackers Short
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Xtrackers is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Low and Xtrackers Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Short Duration 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 Low are associated (or correlated) with Xtrackers Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Short Duration has no effect on the direction of First Trust i.e., First Trust and Xtrackers Short go up and down completely randomly.
Pair Corralation between First Trust and Xtrackers Short
Given the investment horizon of 90 days First Trust is expected to generate 1.76 times less return on investment than Xtrackers Short. But when comparing it to its historical volatility, First Trust Low is 1.52 times less risky than Xtrackers Short. It trades about 0.14 of its potential returns per unit of risk. Xtrackers Short Duration is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,909 in Xtrackers Short Duration on August 28, 2024 and sell it today you would earn a total of 632.00 from holding Xtrackers Short Duration or generate 16.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Low vs. Xtrackers Short Duration
Performance |
| Timeline |
| First Trust Low |
| Xtrackers Short Duration |
First Trust and Xtrackers Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Xtrackers Short
The main advantage of trading using opposite First Trust and Xtrackers Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Xtrackers Short 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 Xtrackers Short will offset losses from the drop in Xtrackers Short's long position.The idea behind First Trust Low and Xtrackers Short Duration 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.| Xtrackers Short vs. Xtrackers High Beta | Xtrackers Short vs. Xtrackers Low Beta | Xtrackers Short vs. iShares Edge High | Xtrackers Short vs. PGIM Active 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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