Correlation Between First Trust and First Asset
Can any of the company-specific risk be diversified away by investing in both First Trust and First Asset 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 First Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and First Asset Morningstar, you can compare the effects of market volatilities on First Trust and First Asset 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 First Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Asset.
Diversification Opportunities for First Trust and First Asset
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and First Asset Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Morningstar 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 Indxx are associated (or correlated) with First Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Morningstar has no effect on the direction of First Trust i.e., First Trust and First Asset go up and down completely randomly.
Pair Corralation between First Trust and First Asset
Assuming the 90 days trading horizon First Trust Indxx is expected to generate 1.03 times more return on investment than First Asset. However, First Trust is 1.03 times more volatile than First Asset Morningstar. It trades about 0.1 of its potential returns per unit of risk. First Asset Morningstar is currently generating about 0.09 per unit of risk. If you would invest 812.00 in First Trust Indxx on August 30, 2024 and sell it today you would earn a total of 352.00 from holding First Trust Indxx or generate 43.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. First Asset Morningstar
Performance |
| Timeline |
| First Trust Indxx |
| First Asset Morningstar |
First Trust and First Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Asset
The main advantage of trading using opposite First Trust and First Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, First Asset 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 Asset will offset losses from the drop in First Asset's long position.| First Trust vs. iShares SPTSX 60 | First Trust vs. iShares Core SP | First Trust vs. iShares Core SPTSX | First Trust vs. BMO Aggregate Bond |
| First Asset vs. First Trust Indxx | First Asset vs. First Trust Senior | First Asset vs. First Trust AlphaDEX | First Asset vs. First Trust Indxx |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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