Correlation Between Global X and First Trust
Can any of the company-specific risk be diversified away by investing in both Global X and First 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 Global X and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Russell and First Trust BuyWrite, you can compare the effects of market volatilities on Global X and First 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 Global X with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and First Trust.
Diversification Opportunities for Global X and First Trust
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X Russell and First Trust BuyWrite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust BuyWrite and Global X 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 Global X Russell are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust BuyWrite has no effect on the direction of Global X i.e., Global X and First Trust go up and down completely randomly.
Pair Corralation between Global X and First Trust
Given the investment horizon of 90 days Global X is expected to generate 1.62 times less return on investment than First Trust. In addition to that, Global X is 1.72 times more volatile than First Trust BuyWrite. It trades about 0.04 of its total potential returns per unit of risk. First Trust BuyWrite is currently generating about 0.12 per unit of volatility. If you would invest 1,682 in First Trust BuyWrite on August 26, 2024 and sell it today you would earn a total of 686.00 from holding First Trust BuyWrite or generate 40.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Russell vs. First Trust BuyWrite
Performance |
| Timeline |
| Global X Russell |
| First Trust BuyWrite |
Global X and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and First Trust
The main advantage of trading using opposite Global X and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind Global X Russell and First Trust BuyWrite pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Trust vs. First Trust Emerging | First Trust vs. First Trust Managed | First Trust vs. First Trust Senior | First Trust vs. First Trust Income |
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.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |