Correlation Between WisdomTree Floating and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Floating 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 WisdomTree Floating and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Floating Rate and First Trust Mid, you can compare the effects of market volatilities on WisdomTree Floating 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 WisdomTree Floating with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Floating and First Trust.
Diversification Opportunities for WisdomTree Floating and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Floating Rate and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and WisdomTree Floating 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 WisdomTree Floating Rate 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 Mid has no effect on the direction of WisdomTree Floating i.e., WisdomTree Floating and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Floating and First Trust
Given the investment horizon of 90 days WisdomTree Floating is expected to generate 19.3 times less return on investment than First Trust. But when comparing it to its historical volatility, WisdomTree Floating Rate is 67.33 times less risky than First Trust. It trades about 1.0 of its potential returns per unit of risk. First Trust Mid is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 8,071 in First Trust Mid on August 27, 2024 and sell it today you would earn a total of 661.00 from holding First Trust Mid or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Floating Rate vs. First Trust Mid
Performance |
| Timeline |
| WisdomTree Floating Rate |
| First Trust Mid |
WisdomTree Floating and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Floating and First Trust
The main advantage of trading using opposite WisdomTree Floating and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Floating 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.| WisdomTree Floating vs. First Trust Low | WisdomTree Floating vs. First Trust Senior | WisdomTree Floating vs. First Trust TCW | WisdomTree Floating vs. First Trust Tactical |
| First Trust vs. First Trust Small | First Trust vs. First Trust Mid | First Trust vs. First Trust Small | First Trust vs. First Trust Multi |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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