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 Large and First Trust Developed, 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
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FlexShares and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Quality Large and First Trust Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Developed 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 Large 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 Developed 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
Considering the 90-day investment horizon FlexShares Quality Large is expected to generate 0.83 times more return on investment than First Trust. However, FlexShares Quality Large is 1.21 times less risky than First Trust. It trades about 0.32 of its potential returns per unit of risk. First Trust Developed is currently generating about -0.02 per unit of risk. If you would invest 6,449 in FlexShares Quality Large on September 1, 2024 and sell it today you would earn a total of 340.00 from holding FlexShares Quality Large or generate 5.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Quality Large vs. First Trust Developed
Performance |
| Timeline |
| FlexShares Quality Large |
| First Trust Developed |
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. FlexShares Disciplined Duration | FlexShares Quality vs. FlexShares STOXX Global | FlexShares Quality vs. FlexShares Real Assets | FlexShares Quality vs. FlexShares Credit Scored Long |
| First Trust vs. First Trust Asia | First Trust vs. First Trust United | First Trust vs. First Trust Germany | First Trust vs. First Trust Japan |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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