Correlation Between First Trust and Return Stacked
Can any of the company-specific risk be diversified away by investing in both First Trust and Return Stacked 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 Return Stacked into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust TCW and Return Stacked Bonds, you can compare the effects of market volatilities on First Trust and Return Stacked 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 Return Stacked. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Return Stacked.
Diversification Opportunities for First Trust and Return Stacked
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Return is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Return Stacked Bonds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Return Stacked Bonds 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 TCW are associated (or correlated) with Return Stacked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Return Stacked Bonds has no effect on the direction of First Trust i.e., First Trust and Return Stacked go up and down completely randomly.
Pair Corralation between First Trust and Return Stacked
Given the investment horizon of 90 days First Trust is expected to generate 1.39 times less return on investment than Return Stacked. But when comparing it to its historical volatility, First Trust TCW is 4.17 times less risky than Return Stacked. It trades about 0.46 of its potential returns per unit of risk. Return Stacked Bonds is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,826 in Return Stacked Bonds on September 13, 2024 and sell it today you would earn a total of 32.00 from holding Return Stacked Bonds or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust TCW vs. Return Stacked Bonds
Performance |
| Timeline |
| First Trust TCW |
| Return Stacked Bonds |
First Trust and Return Stacked Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Return Stacked
The main advantage of trading using opposite First Trust and Return Stacked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Return Stacked 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 Return Stacked will offset losses from the drop in Return Stacked's long position.| First Trust vs. First Trust TCW | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Senior |
| Return Stacked vs. SPDR Bloomberg Barclays | Return Stacked vs. SPDR SSGA Fixed | Return Stacked vs. SPDR DoubleLine Short | Return Stacked vs. SPDR Portfolio Corporate |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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