Correlation Between Ned Davis and First Trust
Can any of the company-specific risk be diversified away by investing in both Ned Davis 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 Ned Davis and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ned Davis Research and First Trust Multi Asset, you can compare the effects of market volatilities on Ned Davis 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 Ned Davis with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ned Davis and First Trust.
Diversification Opportunities for Ned Davis and First Trust
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ned and First is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ned Davis Research and First Trust Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and Ned Davis 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 Ned Davis Research 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 Multi has no effect on the direction of Ned Davis i.e., Ned Davis and First Trust go up and down completely randomly.
Pair Corralation between Ned Davis and First Trust
Given the investment horizon of 90 days Ned Davis is expected to generate 1.4 times less return on investment than First Trust. In addition to that, Ned Davis is 1.33 times more volatile than First Trust Multi Asset. It trades about 0.09 of its total potential returns per unit of risk. First Trust Multi Asset is currently generating about 0.17 per unit of volatility. If you would invest 1,624 in First Trust Multi Asset on September 3, 2024 and sell it today you would earn a total of 70.00 from holding First Trust Multi Asset or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.0% |
| Values | Daily Returns |
Ned Davis Research vs. First Trust Multi Asset
Performance |
| Timeline |
| Ned Davis Research |
| First Trust Multi |
Ned Davis and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ned Davis and First Trust
The main advantage of trading using opposite Ned Davis and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ned Davis 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.| Ned Davis vs. First Trust Multi Asset | Ned Davis vs. Collaborative Investment Series | Ned Davis vs. EA Series Trust | Ned Davis vs. Ocean Park International |
| First Trust vs. Global X SuperIncome | First Trust vs. iShares Morningstar Multi Asset | First Trust vs. Invesco CEF Income | First Trust vs. VanEck Fallen Angel |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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