Correlation Between First Trust and Brompton Global
Can any of the company-specific risk be diversified away by investing in both First Trust and Brompton Global 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 Brompton Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SMID and Brompton Global Dividend, you can compare the effects of market volatilities on First Trust and Brompton Global 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 Brompton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Brompton Global.
Diversification Opportunities for First Trust and Brompton Global
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Brompton is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID and Brompton Global Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Global Dividend 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 SMID are associated (or correlated) with Brompton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Global Dividend has no effect on the direction of First Trust i.e., First Trust and Brompton Global go up and down completely randomly.
Pair Corralation between First Trust and Brompton Global
Assuming the 90 days trading horizon First Trust SMID is expected to generate 1.84 times more return on investment than Brompton Global. However, First Trust is 1.84 times more volatile than Brompton Global Dividend. It trades about 0.29 of its potential returns per unit of risk. Brompton Global Dividend is currently generating about 0.16 per unit of risk. If you would invest 2,154 in First Trust SMID on September 1, 2024 and sell it today you would earn a total of 287.00 from holding First Trust SMID or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Trust SMID vs. Brompton Global Dividend
Performance |
| Timeline |
| First Trust SMID |
| Brompton Global Dividend |
First Trust and Brompton Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Brompton Global
The main advantage of trading using opposite First Trust and Brompton Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Brompton Global 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 Brompton Global will offset losses from the drop in Brompton Global's long position.| First Trust vs. Brompton Global Dividend | First Trust vs. Global Healthcare Income | First Trust vs. Tech Leaders Income | First Trust vs. Brompton North American |
| Brompton Global vs. Global Healthcare Income | Brompton Global vs. Tech Leaders Income | Brompton Global vs. Brompton North American | Brompton Global vs. Brompton European Dividend |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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