Correlation Between First Trust and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both First Trust and WisdomTree 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 First Trust and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Nasdaq and WisdomTree Trust , you can compare the effects of market volatilities on First Trust and WisdomTree 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 First Trust with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree Trust.
Diversification Opportunities for First Trust and WisdomTree Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and WisdomTree is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust 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 are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of First Trust i.e., First Trust and WisdomTree Trust go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree Trust
Given the investment horizon of 90 days First Trust is expected to generate 1.11 times less return on investment than WisdomTree Trust. But when comparing it to its historical volatility, First Trust Nasdaq is 1.46 times less risky than WisdomTree Trust. It trades about 0.17 of its potential returns per unit of risk. WisdomTree Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,212 in WisdomTree Trust on November 3, 2024 and sell it today you would earn a total of 112.00 from holding WisdomTree Trust or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Nasdaq vs. WisdomTree Trust
Performance |
| Timeline |
| First Trust Nasdaq |
| WisdomTree Trust |
First Trust and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree Trust
The main advantage of trading using opposite First Trust and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WisdomTree 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 WisdomTree Trust will offset losses from the drop in WisdomTree Trust's long position.| First Trust vs. Robo Global Robotics | First Trust vs. Robo Global Artificial | First Trust vs. Global X Robotics | First Trust vs. Direxion Daily Robotics |
| WisdomTree Trust vs. First Trust Nasdaq | WisdomTree Trust vs. Robo Global Artificial | WisdomTree Trust vs. Tidal Trust II | WisdomTree Trust vs. Global X Artificial |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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