Correlation Between MFUT and First Trust
Can any of the company-specific risk be diversified away by investing in both MFUT 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 MFUT and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFUT and First Trust Dorsey, you can compare the effects of market volatilities on MFUT 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 MFUT with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFUT and First Trust.
Diversification Opportunities for MFUT and First Trust
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MFUT and First is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding MFUT and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and MFUT 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 MFUT 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 Dorsey has no effect on the direction of MFUT i.e., MFUT and First Trust go up and down completely randomly.
Pair Corralation between MFUT and First Trust
Given the investment horizon of 90 days MFUT is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, MFUT is 1.64 times less risky than First Trust. The etf trades about -0.19 of its potential returns per unit of risk. The First Trust Dorsey is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,675 in First Trust Dorsey on August 26, 2024 and sell it today you would earn a total of 1,441 from holding First Trust Dorsey or generate 30.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 25.35% |
| Values | Daily Returns |
MFUT vs. First Trust Dorsey
Performance |
| Timeline |
| MFUT |
| First Trust Dorsey |
MFUT and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFUT and First Trust
The main advantage of trading using opposite MFUT and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFUT 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.| MFUT vs. Tidal Trust II | MFUT vs. Tidal Trust II | MFUT vs. First Trust Dorsey | MFUT vs. Direxion Daily META |
| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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