Correlation Between First Trust and TCW ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and TCW ETF 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 TCW ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Multi Asset and TCW ETF Trust, you can compare the effects of market volatilities on First Trust and TCW ETF 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 TCW ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and TCW ETF.
Diversification Opportunities for First Trust and TCW ETF
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and TCW is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and TCW ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCW ETF Trust 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 Multi Asset are associated (or correlated) with TCW ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCW ETF Trust has no effect on the direction of First Trust i.e., First Trust and TCW ETF go up and down completely randomly.
Pair Corralation between First Trust and TCW ETF
Given the investment horizon of 90 days First Trust Multi Asset is expected to generate 0.89 times more return on investment than TCW ETF. However, First Trust Multi Asset is 1.13 times less risky than TCW ETF. It trades about 0.48 of its potential returns per unit of risk. TCW ETF Trust is currently generating about 0.3 per unit of risk. If you would invest 1,632 in First Trust Multi Asset on September 1, 2024 and sell it today you would earn a total of 62.00 from holding First Trust Multi Asset or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 47.62% |
| Values | Daily Returns |
First Trust Multi Asset vs. TCW ETF Trust
Performance |
| Timeline |
| First Trust Multi |
| TCW ETF Trust |
First Trust and TCW ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and TCW ETF
The main advantage of trading using opposite First Trust and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, TCW ETF 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 TCW ETF will offset losses from the drop in TCW ETF's long position.| First Trust vs. Global X SuperIncome | First Trust vs. iShares Morningstar Multi Asset | First Trust vs. Invesco CEF Income | First Trust vs. VanEck Fallen Angel |
| TCW ETF vs. Vanguard Total Stock | TCW ETF vs. SPDR SP 500 | TCW ETF vs. iShares Core SP | TCW ETF vs. Vanguard Total Bond |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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