Correlation Between TD Global and First Trust
Can any of the company-specific risk be diversified away by investing in both TD Global 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 TD Global and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Global Technology and First Trust Indxx, you can compare the effects of market volatilities on TD Global 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 TD Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Global and First Trust.
Diversification Opportunities for TD Global and First Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between TEC and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding TD Global Technology and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and TD Global 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 TD Global Technology 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 Indxx has no effect on the direction of TD Global i.e., TD Global and First Trust go up and down completely randomly.
Pair Corralation between TD Global and First Trust
Assuming the 90 days trading horizon TD Global Technology is expected to generate 1.63 times more return on investment than First Trust. However, TD Global is 1.63 times more volatile than First Trust Indxx. It trades about 0.12 of its potential returns per unit of risk. First Trust Indxx is currently generating about 0.1 per unit of risk. If you would invest 2,235 in TD Global Technology on August 26, 2024 and sell it today you would earn a total of 2,107 from holding TD Global Technology or generate 94.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Global Technology vs. First Trust Indxx
Performance |
| Timeline |
| TD Global Technology |
| First Trust Indxx |
TD Global and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Global and First Trust
The main advantage of trading using opposite TD Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Global 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.| TD Global vs. iShares Core Equity | TD Global vs. Vanguard All Equity ETF | TD Global vs. iShares SPTSX Capped | TD Global vs. Vanguard Growth Portfolio |
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust NASDAQ |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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