Correlation Between NYSE Composite and First Trust
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and First Trust Consumer, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and First Trust.
Diversification Opportunities for NYSE Composite and First Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and NYSE Composite 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 NYSE Composite 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 Consumer has no effect on the direction of NYSE Composite i.e., NYSE Composite and First Trust go up and down completely randomly.
Pair Corralation between NYSE Composite and First Trust
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.25 times less return on investment than First Trust. But when comparing it to its historical volatility, NYSE Composite is 1.48 times less risky than First Trust. It trades about 0.24 of its potential returns per unit of risk. First Trust Consumer is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 6,332 in First Trust Consumer on August 28, 2024 and sell it today you would earn a total of 498.00 from holding First Trust Consumer or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. First Trust Consumer
Performance |
| Timeline |
NYSE Composite and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
First Trust Consumer
Pair trading matchups for First Trust
Pair Trading with NYSE Composite and First Trust
The main advantage of trading using opposite NYSE Composite and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| First Trust vs. VanEck Pharmaceutical ETF | First Trust vs. VanEck Biotech ETF | First Trust vs. VanEck Oil Services | First Trust vs. iShares Transportation Average |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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