Correlation Between First Trust and IDX Dynamic
Can any of the company-specific risk be diversified away by investing in both First Trust and IDX Dynamic 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 IDX Dynamic 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 IDX Dynamic Fixed, you can compare the effects of market volatilities on First Trust and IDX Dynamic 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 IDX Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IDX Dynamic.
Diversification Opportunities for First Trust and IDX Dynamic
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and IDX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and IDX Dynamic Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDX Dynamic Fixed 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 IDX Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDX Dynamic Fixed has no effect on the direction of First Trust i.e., First Trust and IDX Dynamic go up and down completely randomly.
Pair Corralation between First Trust and IDX Dynamic
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 1.7 times more return on investment than IDX Dynamic. However, First Trust is 1.7 times more volatile than IDX Dynamic Fixed. It trades about 0.02 of its potential returns per unit of risk. IDX Dynamic Fixed is currently generating about -0.02 per unit of risk. If you would invest 1,925 in First Trust Exchange Traded on August 26, 2024 and sell it today you would earn a total of 69.00 from holding First Trust Exchange Traded or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.96% |
| Values | Daily Returns |
First Trust Exchange Traded vs. IDX Dynamic Fixed
Performance |
| Timeline |
| First Trust Exchange |
| IDX Dynamic Fixed |
First Trust and IDX Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IDX Dynamic
The main advantage of trading using opposite First Trust and IDX Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IDX Dynamic 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 IDX Dynamic will offset losses from the drop in IDX Dynamic's long position.| First Trust vs. Vanguard Long Term Treasury | First Trust vs. Vanguard Short Term Treasury | First Trust vs. Vanguard Intermediate Term Corporate | First Trust vs. Vanguard Mortgage Backed Securities |
| IDX Dynamic vs. Capital Group Short | IDX Dynamic vs. Capital Group Municipal | IDX Dynamic vs. Capital Group Global | IDX Dynamic vs. Capital Group Dividend |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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