Correlation Between ETC 6 and First Trust
Can any of the company-specific risk be diversified away by investing in both ETC 6 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 ETC 6 and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETC 6 Meridian and First Trust Exchange Traded, you can compare the effects of market volatilities on ETC 6 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 ETC 6 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC 6 and First Trust.
Diversification Opportunities for ETC 6 and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ETC and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ETC 6 Meridian and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and ETC 6 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 ETC 6 Meridian 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 Exchange has no effect on the direction of ETC 6 i.e., ETC 6 and First Trust go up and down completely randomly.
Pair Corralation between ETC 6 and First Trust
Given the investment horizon of 90 days ETC 6 is expected to generate 2.35 times less return on investment than First Trust. But when comparing it to its historical volatility, ETC 6 Meridian is 1.54 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,769 in First Trust Exchange Traded on September 3, 2024 and sell it today you would earn a total of 318.00 from holding First Trust Exchange Traded or generate 17.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 87.95% |
| Values | Daily Returns |
ETC 6 Meridian vs. First Trust Exchange Traded
Performance |
| Timeline |
| ETC 6 Meridian |
| First Trust Exchange |
ETC 6 and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETC 6 and First Trust
The main advantage of trading using opposite ETC 6 and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC 6 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.| ETC 6 vs. 6 Meridian Mega | ETC 6 vs. 6 Meridian Low | ETC 6 vs. 6 Meridian Small | ETC 6 vs. Overlay Shares Large |
| First Trust vs. Ultimus Managers Trust | First Trust vs. American Beacon Select | First Trust vs. Direxion Daily Regional | First Trust vs. Direxion Daily SP |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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