Correlation Between US Treasury and First Trust
Can any of the company-specific risk be diversified away by investing in both US Treasury 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 US Treasury and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and First Trust Bloomberg, you can compare the effects of market volatilities on US Treasury 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 US Treasury with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and First Trust.
Diversification Opportunities for US Treasury and First Trust
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between OBIL and First is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and First Trust Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Bloomberg and US Treasury 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 US Treasury 12 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 Bloomberg has no effect on the direction of US Treasury i.e., US Treasury and First Trust go up and down completely randomly.
Pair Corralation between US Treasury and First Trust
Given the investment horizon of 90 days US Treasury is expected to generate 14.01 times less return on investment than First Trust. But when comparing it to its historical volatility, US Treasury 12 is 21.75 times less risky than First Trust. It trades about 0.32 of its potential returns per unit of risk. First Trust Bloomberg is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,144 in First Trust Bloomberg on November 1, 2024 and sell it today you would earn a total of 65.90 from holding First Trust Bloomberg or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Treasury 12 vs. First Trust Bloomberg
Performance |
| Timeline |
| US Treasury 12 |
| First Trust Bloomberg |
US Treasury and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and First Trust
The main advantage of trading using opposite US Treasury and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury 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.| US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. US Treasury 6 |
| First Trust vs. Freedom Day Dividend | First Trust vs. Franklin Templeton ETF | First Trust vs. iShares MSCI China | First Trust vs. Tidal Trust II |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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