Correlation Between First Trust and Xtrackers California
Can any of the company-specific risk be diversified away by investing in both First Trust and Xtrackers California 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 California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Flexible and Xtrackers California Municipal, you can compare the effects of market volatilities on First Trust and Xtrackers California 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 California. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Xtrackers California.
Diversification Opportunities for First Trust and Xtrackers California
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Xtrackers is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Flexible and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California 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 Flexible are associated (or correlated) with Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of First Trust i.e., First Trust and Xtrackers California go up and down completely randomly.
Pair Corralation between First Trust and Xtrackers California
Given the investment horizon of 90 days First Trust Flexible is expected to generate 3.12 times more return on investment than Xtrackers California. However, First Trust is 3.12 times more volatile than Xtrackers California Municipal. It trades about 0.06 of its potential returns per unit of risk. Xtrackers California Municipal is currently generating about 0.06 per unit of risk. If you would invest 1,532 in First Trust Flexible on August 29, 2024 and sell it today you would earn a total of 205.00 from holding First Trust Flexible or generate 13.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 82.82% |
| Values | Daily Returns |
First Trust Flexible vs. Xtrackers California Municipal
Performance |
| Timeline |
| First Trust Flexible |
| Xtrackers California |
First Trust and Xtrackers California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Xtrackers California
The main advantage of trading using opposite First Trust and Xtrackers California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Xtrackers California 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 California will offset losses from the drop in Xtrackers California's long position.| First Trust vs. Fundamental Income Net | First Trust vs. TTM Technologies | First Trust vs. DXP Enterprises | First Trust vs. Citi Trends |
| Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. ALPS Intermediate Municipal | Xtrackers California vs. MYMF |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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