Correlation Between First Trust and NEOS Russell
Can any of the company-specific risk be diversified away by investing in both First Trust and NEOS Russell 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 NEOS Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Multi Manager and NEOS Russell 2000, you can compare the effects of market volatilities on First Trust and NEOS Russell 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 NEOS Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and NEOS Russell.
Diversification Opportunities for First Trust and NEOS Russell
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and NEOS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Manager and NEOS Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOS Russell 2000 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 Manager are associated (or correlated) with NEOS Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOS Russell 2000 has no effect on the direction of First Trust i.e., First Trust and NEOS Russell go up and down completely randomly.
Pair Corralation between First Trust and NEOS Russell
Given the investment horizon of 90 days First Trust Multi Manager is expected to generate 1.66 times more return on investment than NEOS Russell. However, First Trust is 1.66 times more volatile than NEOS Russell 2000. It trades about 0.1 of its potential returns per unit of risk. NEOS Russell 2000 is currently generating about 0.15 per unit of risk. If you would invest 2,115 in First Trust Multi Manager on November 8, 2024 and sell it today you would earn a total of 55.00 from holding First Trust Multi Manager or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Multi Manager vs. NEOS Russell 2000
Performance |
| Timeline |
| First Trust Multi |
| NEOS Russell 2000 |
First Trust and NEOS Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and NEOS Russell
The main advantage of trading using opposite First Trust and NEOS Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, NEOS Russell 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 NEOS Russell will offset losses from the drop in NEOS Russell's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Active | First Trust vs. First Trust Expanded |
| NEOS Russell vs. JPMorgan Fundamental Data | NEOS Russell vs. Davis Select International | NEOS Russell vs. Dimensional ETF Trust | NEOS Russell vs. Principal Value ETF |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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