Correlation Between First Trust and US Global
Can any of the company-specific risk be diversified away by investing in both First Trust and US Global 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 US Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and US Global Sea, you can compare the effects of market volatilities on First Trust and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and US Global.
Diversification Opportunities for First Trust and US Global
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and SEA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 Exchange Traded are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of First Trust i.e., First Trust and US Global go up and down completely randomly.
Pair Corralation between First Trust and US Global
Given the investment horizon of 90 days First Trust is expected to generate 4.27 times less return on investment than US Global. But when comparing it to its historical volatility, First Trust Exchange Traded is 1.26 times less risky than US Global. It trades about 0.02 of its potential returns per unit of risk. US Global Sea is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,295 in US Global Sea on August 27, 2024 and sell it today you would earn a total of 315.00 from holding US Global Sea or generate 24.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. US Global Sea
Performance |
| Timeline |
| First Trust Exchange |
| US Global Sea |
First Trust and US Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and US Global
The main advantage of trading using opposite First Trust and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Expanded | First Trust vs. BlackRock Future Health | First Trust vs. SPDR SP Health |
| US Global vs. Gabelli ETFs Trust | US Global vs. First Trust Exchange Traded | US Global vs. Northern Lights | US Global vs. First Trust Exchange Traded |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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