Correlation Between Wilmington Funds and First Trust
Can any of the company-specific risk be diversified away by investing in both Wilmington Funds 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 Wilmington Funds and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilmington Funds and First Trust Preferred, you can compare the effects of market volatilities on Wilmington Funds 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 Wilmington Funds with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Funds and First Trust.
Diversification Opportunities for Wilmington Funds and First Trust
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wilmington and First is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Funds and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and Wilmington Funds 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 Wilmington Funds 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 Preferred has no effect on the direction of Wilmington Funds i.e., Wilmington Funds and First Trust go up and down completely randomly.
Pair Corralation between Wilmington Funds and First Trust
Assuming the 90 days horizon Wilmington Funds is expected to generate 3.29 times less return on investment than First Trust. But when comparing it to its historical volatility, Wilmington Funds is 1.43 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,875 in First Trust Preferred on September 3, 2024 and sell it today you would earn a total of 129.00 from holding First Trust Preferred or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilmington Funds vs. First Trust Preferred
Performance |
| Timeline |
| Wilmington Funds |
| First Trust Preferred |
Wilmington Funds and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Funds and First Trust
The main advantage of trading using opposite Wilmington Funds and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Funds 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.| Wilmington Funds vs. Vanguard Total Stock | Wilmington Funds vs. Vanguard 500 Index | Wilmington Funds vs. Vanguard Total Stock | Wilmington Funds vs. Vanguard Total Stock |
| First Trust vs. Elfun Government Money | First Trust vs. Wilmington Funds | First Trust vs. Blackrock Exchange Portfolio | First Trust vs. Transamerica Funds |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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