Correlation Between T Rex and First Trust
Can any of the company-specific risk be diversified away by investing in both T Rex 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 T Rex and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Rex 2X Long and First Trust Indxx, you can compare the effects of market volatilities on T Rex 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 T Rex with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and First Trust.
Diversification Opportunities for T Rex and First Trust
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NVDX and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and T Rex 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 T Rex 2X Long 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 Indxx has no effect on the direction of T Rex i.e., T Rex and First Trust go up and down completely randomly.
Pair Corralation between T Rex and First Trust
Given the investment horizon of 90 days T Rex 2X Long is expected to under-perform the First Trust. In addition to that, T Rex is 3.07 times more volatile than First Trust Indxx. It trades about -0.05 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.01 per unit of volatility. If you would invest 3,200 in First Trust Indxx on August 28, 2024 and sell it today you would earn a total of 8.00 from holding First Trust Indxx or generate 0.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
T Rex 2X Long vs. First Trust Indxx
Performance |
| Timeline |
| T Rex 2X |
| First Trust Indxx |
T Rex and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rex and First Trust
The main advantage of trading using opposite T Rex and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex 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.| T Rex vs. Direxion Daily SP | T Rex vs. Direxion Daily Semiconductor | T Rex vs. Direxion Daily Semiconductor |
| First Trust vs. Gabelli ETFs Trust | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. Northern Lights |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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