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 Small 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
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and RNLC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Small 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 Small 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
If you would invest 2,431 in First Trust Small on August 29, 2024 and sell it today you would earn a total of 811.00 from holding First Trust Small or generate 33.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.34% |
| Values | Daily Returns |
First Trust Small vs. RNLC
Performance |
| Timeline |
| First Trust Small |
| 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. Vanguard Mid Cap Index | First Trust vs. Vanguard Small Cap Value | First Trust vs. Vanguard FTSE Emerging | First Trust vs. Vanguard Large Cap Index |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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