Correlation Between First Trust and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both First Trust and High-yield Municipal 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 First Trust and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ 100 and High Yield Municipal Fund, you can compare the effects of market volatilities on First Trust and High-yield Municipal 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 First Trust with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and High-yield Municipal.
Diversification Opportunities for First Trust and High-yield Municipal
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and High-yield is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ 100 and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and First Trust 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 First Trust NASDAQ 100 are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of First Trust i.e., First Trust and High-yield Municipal go up and down completely randomly.
Pair Corralation between First Trust and High-yield Municipal
Given the investment horizon of 90 days First Trust NASDAQ 100 is expected to generate 2.66 times more return on investment than High-yield Municipal. However, First Trust is 2.66 times more volatile than High Yield Municipal Fund. It trades about 0.17 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.13 per unit of risk. If you would invest 12,548 in First Trust NASDAQ 100 on August 25, 2024 and sell it today you would earn a total of 516.00 from holding First Trust NASDAQ 100 or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ 100 vs. High Yield Municipal Fund
Performance |
| Timeline |
| First Trust NASDAQ |
| High Yield Municipal |
First Trust and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and High-yield Municipal
The main advantage of trading using opposite First Trust and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, High-yield Municipal 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.| First Trust vs. Invesco Dynamic Large | First Trust vs. Perella Weinberg Partners | First Trust vs. HUMANA INC | First Trust vs. Aquagold International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |