Correlation Between Timothy Plan and First Trust
Can any of the company-specific risk be diversified away by investing in both Timothy Plan 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 Timothy Plan and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timothy Plan High and First Trust Small, you can compare the effects of market volatilities on Timothy Plan 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 Timothy Plan with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Plan and First Trust.
Diversification Opportunities for Timothy Plan and First Trust
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Timothy and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Plan High and First Trust Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Small and Timothy Plan 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 Timothy Plan High 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 Small has no effect on the direction of Timothy Plan i.e., Timothy Plan and First Trust go up and down completely randomly.
Pair Corralation between Timothy Plan and First Trust
Given the investment horizon of 90 days Timothy Plan is expected to generate 2.1 times less return on investment than First Trust. But when comparing it to its historical volatility, Timothy Plan High is 2.16 times less risky than First Trust. It trades about 0.19 of its potential returns per unit of risk. First Trust Small is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,424 in First Trust Small on August 24, 2024 and sell it today you would earn a total of 411.00 from holding First Trust Small or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timothy Plan High vs. First Trust Small
Performance |
| Timeline |
| Timothy Plan High |
| First Trust Small |
Timothy Plan and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timothy Plan and First Trust
The main advantage of trading using opposite Timothy Plan and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timothy Plan 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.| Timothy Plan vs. Timothy Plan LargeMid | Timothy Plan vs. Timothy Plan Small | Timothy Plan vs. Timothy Plan International | Timothy Plan vs. Timothy Plan |
| First Trust vs. First Trust Mid | First Trust vs. First Trust Small | First Trust vs. First Trust Mid | First Trust vs. First Trust Small |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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