Correlation Between First Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and First Trust 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 First Trust TCW, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and First Trust.
Diversification Opportunities for First Trust and First Trust
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and First is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW 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 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 TCW has no effect on the direction of First Trust i.e., First Trust and First Trust go up and down completely randomly.
Pair Corralation between First Trust and First Trust
Given the investment horizon of 90 days First Trust SMID is expected to generate 3.89 times more return on investment than First Trust. However, First Trust is 3.89 times more volatile than First Trust TCW. It trades about 0.11 of its potential returns per unit of risk. First Trust TCW is currently generating about -0.14 per unit of risk. If you would invest 3,578 in First Trust SMID on August 23, 2024 and sell it today you would earn a total of 313.00 from holding First Trust SMID or generate 8.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SMID vs. First Trust TCW
Performance |
| Timeline |
| First Trust SMID |
| First Trust TCW |
First Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and First Trust
The main advantage of trading using opposite First Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. Vanguard Small Cap Value | First Trust vs. iShares Russell 2000 | First Trust vs. Dimensional Targeted Value | First Trust vs. SPDR SP 600 |
| First Trust vs. iShares Core Total | First Trust vs. Fidelity Total Bond | First Trust vs. Hartford Total Return | First Trust vs. JPMorgan Core Plus |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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