Correlation Between Global X and First Trust
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X MLP and First Trust Preferred, you can compare the effects of market volatilities on Global X 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 Global X with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and First Trust.
Diversification Opportunities for Global X and First Trust
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global X MLP and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and Global X 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 Global X MLP 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 Preferred has no effect on the direction of Global X i.e., Global X and First Trust go up and down completely randomly.
Pair Corralation between Global X and First Trust
Given the investment horizon of 90 days Global X MLP is expected to under-perform the First Trust. In addition to that, Global X is 7.8 times more volatile than First Trust Preferred. It trades about -0.04 of its total potential returns per unit of risk. First Trust Preferred is currently generating about 0.31 per unit of volatility. If you would invest 1,764 in First Trust Preferred on November 29, 2024 and sell it today you would earn a total of 19.50 from holding First Trust Preferred or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global X MLP vs. First Trust Preferred
Performance |
| Timeline |
| Global X MLP |
| First Trust Preferred |
Global X and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and First Trust
The main advantage of trading using opposite Global X and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Global X MLP | Global X vs. Alerian Energy Infrastructure | Global X vs. First Trust North | Global X vs. Tortoise North American |
| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |