Correlation Between Tortoise North and First Trust
Can any of the company-specific risk be diversified away by investing in both Tortoise North 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 Tortoise North and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tortoise North American and First Trust Nasdaq, you can compare the effects of market volatilities on Tortoise North 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 Tortoise North with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tortoise North and First Trust.
Diversification Opportunities for Tortoise North and First Trust
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tortoise and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tortoise North American and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Tortoise North 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 Tortoise North American 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 Nasdaq has no effect on the direction of Tortoise North i.e., Tortoise North and First Trust go up and down completely randomly.
Pair Corralation between Tortoise North and First Trust
Given the investment horizon of 90 days Tortoise North American is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Tortoise North American is 1.13 times less risky than First Trust. The etf trades about -0.1 of its potential returns per unit of risk. The First Trust Nasdaq is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,072 in First Trust Nasdaq on November 25, 2024 and sell it today you would lose (69.00) from holding First Trust Nasdaq or give up 2.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Tortoise North American vs. First Trust Nasdaq
Performance |
Timeline |
Tortoise North American |
First Trust Nasdaq |
Tortoise North and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tortoise North and First Trust
The main advantage of trading using opposite Tortoise North and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tortoise North 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.Tortoise North vs. Alerian Energy Infrastructure | ||
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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