Correlation Between FlexShares Quality and First Trust
Can any of the company-specific risk be diversified away by investing in both FlexShares Quality 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 FlexShares Quality and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Quality Dividend and First Trust SP, you can compare the effects of market volatilities on FlexShares Quality 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 FlexShares Quality with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Quality and First Trust.
Diversification Opportunities for FlexShares Quality and First Trust
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FlexShares and First is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Quality Dividend and First Trust SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SP and FlexShares Quality 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 FlexShares Quality Dividend 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 SP has no effect on the direction of FlexShares Quality i.e., FlexShares Quality and First Trust go up and down completely randomly.
Pair Corralation between FlexShares Quality and First Trust
Given the investment horizon of 90 days FlexShares Quality is expected to generate 1.11 times less return on investment than First Trust. But when comparing it to its historical volatility, FlexShares Quality Dividend is 1.56 times less risky than First Trust. It trades about 0.2 of its potential returns per unit of risk. First Trust SP is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,928 in First Trust SP on August 30, 2024 and sell it today you would earn a total of 91.00 from holding First Trust SP or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Quality Dividend vs. First Trust SP
Performance |
| Timeline |
| FlexShares Quality |
| First Trust SP |
FlexShares Quality and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Quality and First Trust
The main advantage of trading using opposite FlexShares Quality and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Quality 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.| FlexShares Quality vs. iShares MSCI USA | FlexShares Quality vs. ABIVAX Socit Anonyme | FlexShares Quality vs. HUMANA INC | FlexShares Quality vs. SCOR PK |
| First Trust vs. Invesco Active Real | First Trust vs. First Trust Consumer | First Trust vs. First Trust Utilities | First Trust vs. iShares Residential and |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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