Correlation Between Research Affiliates and First Trust
Can any of the company-specific risk be diversified away by investing in both Research Affiliates 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 Research Affiliates and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Research Affiliates Deletions and First Trust Dow, you can compare the effects of market volatilities on Research Affiliates 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 Research Affiliates with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Research Affiliates and First Trust.
Diversification Opportunities for Research Affiliates and First Trust
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Research and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Research Affiliates Deletions and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Research Affiliates 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 Research Affiliates Deletions 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 Dow has no effect on the direction of Research Affiliates i.e., Research Affiliates and First Trust go up and down completely randomly.
Pair Corralation between Research Affiliates and First Trust
Given the investment horizon of 90 days Research Affiliates is expected to generate 1.17 times less return on investment than First Trust. But when comparing it to its historical volatility, Research Affiliates Deletions is 1.23 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,918 in First Trust Dow on October 26, 2024 and sell it today you would earn a total of 144.00 from holding First Trust Dow or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Research Affiliates Deletions vs. First Trust Dow
Performance |
| Timeline |
| Research Affiliates |
| First Trust Dow |
Research Affiliates and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Research Affiliates and First Trust
The main advantage of trading using opposite Research Affiliates and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Research Affiliates 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.| Research Affiliates vs. Cambria Micro And | Research Affiliates vs. First Trust Dow | Research Affiliates vs. iShares Micro Cap ETF | Research Affiliates vs. Vanguard Mega Cap |
| First Trust vs. iShares Micro Cap ETF | First Trust vs. Invesco SP MidCap | First Trust vs. Invesco SP SmallCap | First Trust vs. First Trust Small |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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