Correlation Between First Trust and RNLC
Can any of the company-specific risk be diversified away by investing in both First Trust and RNLC 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 RNLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and RNLC, you can compare the effects of market volatilities on First Trust and RNLC 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 RNLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and RNLC.
Diversification Opportunities for First Trust and RNLC
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and RNLC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and RNLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RNLC 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 Emerging are associated (or correlated) with RNLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RNLC has no effect on the direction of First Trust i.e., First Trust and RNLC go up and down completely randomly.
Pair Corralation between First Trust and RNLC
Given the investment horizon of 90 days First Trust is expected to generate 5.42 times less return on investment than RNLC. In addition to that, First Trust is 1.02 times more volatile than RNLC. It trades about 0.05 of its total potential returns per unit of risk. RNLC is currently generating about 0.26 per unit of volatility. If you would invest 2,984 in RNLC on August 26, 2024 and sell it today you would earn a total of 346.00 from holding RNLC or generate 11.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 14.21% |
| Values | Daily Returns |
First Trust Emerging vs. RNLC
Performance |
| Timeline |
| First Trust Emerging |
| RNLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Trust and RNLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and RNLC
The main advantage of trading using opposite First Trust and RNLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, RNLC 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 RNLC will offset losses from the drop in RNLC'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 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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