Correlation Between Litman Gregory and First Trust
Can any of the company-specific risk be diversified away by investing in both Litman Gregory 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 Litman Gregory and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litman Gregory Funds and First Trust Exchange Traded, you can compare the effects of market volatilities on Litman Gregory 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 Litman Gregory with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litman Gregory and First Trust.
Diversification Opportunities for Litman Gregory and First Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Litman and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Litman Gregory Funds and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Litman Gregory 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 Litman Gregory Funds 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 Exchange has no effect on the direction of Litman Gregory i.e., Litman Gregory and First Trust go up and down completely randomly.
Pair Corralation between Litman Gregory and First Trust
Given the investment horizon of 90 days Litman Gregory Funds is expected to generate 4.78 times more return on investment than First Trust. However, Litman Gregory is 4.78 times more volatile than First Trust Exchange Traded. It trades about 0.34 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.48 per unit of risk. If you would invest 1,141 in Litman Gregory Funds on September 4, 2024 and sell it today you would earn a total of 68.00 from holding Litman Gregory Funds or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litman Gregory Funds vs. First Trust Exchange Traded
Performance |
| Timeline |
| Litman Gregory Funds |
| First Trust Exchange |
Litman Gregory and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litman Gregory and First Trust
The main advantage of trading using opposite Litman Gregory and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litman Gregory 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.| Litman Gregory vs. Franklin Templeton ETF | Litman Gregory vs. TrueShares Technology AI | Litman Gregory vs. Franklin Exponential Data | Litman Gregory vs. Franklin Genomic Advancements |
| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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