Correlation Between First Trust and FlexShares Real
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares Real 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 FlexShares Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust RiverFront and FlexShares Real Assets, you can compare the effects of market volatilities on First Trust and FlexShares Real 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 FlexShares Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Real.
Diversification Opportunities for First Trust and FlexShares Real
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and FlexShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust RiverFront and FlexShares Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Real Assets 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 RiverFront are associated (or correlated) with FlexShares Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Real Assets has no effect on the direction of First Trust i.e., First Trust and FlexShares Real go up and down completely randomly.
Pair Corralation between First Trust and FlexShares Real
Given the investment horizon of 90 days First Trust RiverFront is expected to generate 1.39 times more return on investment than FlexShares Real. However, First Trust is 1.39 times more volatile than FlexShares Real Assets. It trades about 0.07 of its potential returns per unit of risk. FlexShares Real Assets is currently generating about 0.06 per unit of risk. If you would invest 5,520 in First Trust RiverFront on August 29, 2024 and sell it today you would earn a total of 885.00 from holding First Trust RiverFront or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust RiverFront vs. FlexShares Real Assets
Performance |
| Timeline |
| First Trust RiverFront |
| FlexShares Real Assets |
First Trust and FlexShares Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and FlexShares Real
The main advantage of trading using opposite First Trust and FlexShares Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares Real 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 FlexShares Real will offset losses from the drop in FlexShares Real's long position.| First Trust vs. Invesco PureBeta MSCI | First Trust vs. Aquagold International | First Trust vs. Morningstar Unconstrained Allocation | First Trust vs. High Yield Municipal Fund |
| FlexShares Real vs. WisdomTree Interest Rate | FlexShares Real vs. First Trust Developed | FlexShares Real vs. VictoryShares International Volatility |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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