Correlation Between Freedom Day and First Trust
Can any of the company-specific risk be diversified away by investing in both Freedom Day 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 Freedom Day and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Day Dividend and First Trust Bloomberg, you can compare the effects of market volatilities on Freedom Day 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 Freedom Day with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and First Trust.
Diversification Opportunities for Freedom Day and First Trust
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freedom and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and First Trust Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Bloomberg and Freedom Day 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 Freedom Day Dividend 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 Bloomberg has no effect on the direction of Freedom Day i.e., Freedom Day and First Trust go up and down completely randomly.
Pair Corralation between Freedom Day and First Trust
Given the investment horizon of 90 days Freedom Day is expected to generate 1.23 times less return on investment than First Trust. But when comparing it to its historical volatility, Freedom Day Dividend is 1.39 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Bloomberg is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,113 in First Trust Bloomberg on September 1, 2024 and sell it today you would earn a total of 338.00 from holding First Trust Bloomberg or generate 16.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Freedom Day Dividend vs. First Trust Bloomberg
Performance |
| Timeline |
| Freedom Day Dividend |
| First Trust Bloomberg |
Freedom Day and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Day and First Trust
The main advantage of trading using opposite Freedom Day and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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.| Freedom Day vs. iShares Core SP | Freedom Day vs. iShares Core MSCI | Freedom Day vs. iShares Broad USD | Freedom Day vs. iShares Core SP |
| First Trust vs. Freedom Day Dividend | First Trust vs. iShares MSCI China | First Trust vs. iShares Dividend and | First Trust vs. SmartETFs Dividend Builder |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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