Correlation Between Mackenzie International and First Trust
Can any of the company-specific risk be diversified away by investing in both Mackenzie International 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 Mackenzie International and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mackenzie International Equity and First Trust Cboe, you can compare the effects of market volatilities on Mackenzie International 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 Mackenzie International with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mackenzie International and First Trust.
Diversification Opportunities for Mackenzie International and First Trust
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mackenzie and First is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie International Equity and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Mackenzie International 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 Mackenzie International Equity 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 Cboe has no effect on the direction of Mackenzie International i.e., Mackenzie International and First Trust go up and down completely randomly.
Pair Corralation between Mackenzie International and First Trust
Assuming the 90 days trading horizon Mackenzie International is expected to generate 1.12 times less return on investment than First Trust. In addition to that, Mackenzie International is 1.2 times more volatile than First Trust Cboe. It trades about 0.07 of its total potential returns per unit of risk. First Trust Cboe is currently generating about 0.09 per unit of volatility. If you would invest 3,366 in First Trust Cboe on August 25, 2024 and sell it today you would earn a total of 996.00 from holding First Trust Cboe or generate 29.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Mackenzie International Equity vs. First Trust Cboe
Performance |
| Timeline |
| Mackenzie International |
| First Trust Cboe |
Mackenzie International and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mackenzie International and First Trust
The main advantage of trading using opposite Mackenzie International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mackenzie International 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.The idea behind Mackenzie International Equity and First Trust Cboe pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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