Correlation Between WisdomTree Managed and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Managed 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 Managed 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 Managed Futures and First Trust Managed, you can compare the effects of market volatilities on WisdomTree Managed 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 Managed with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Managed and First Trust.
Diversification Opportunities for WisdomTree Managed and First Trust
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and WisdomTree Managed 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 Managed Futures 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 Managed has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Managed and First Trust
Given the investment horizon of 90 days WisdomTree Managed is expected to generate 1.17 times less return on investment than First Trust. In addition to that, WisdomTree Managed is 2.63 times more volatile than First Trust Managed. It trades about 0.05 of its total potential returns per unit of risk. First Trust Managed is currently generating about 0.16 per unit of volatility. If you would invest 4,744 in First Trust Managed on August 28, 2024 and sell it today you would earn a total of 84.00 from holding First Trust Managed or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Managed Futures vs. First Trust Managed
Performance |
| Timeline |
| WisdomTree Managed |
| First Trust Managed |
WisdomTree Managed and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Managed and First Trust
The main advantage of trading using opposite WisdomTree Managed and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Managed 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 Managed vs. First Trust Managed | WisdomTree Managed vs. iMGP DBi Managed | WisdomTree Managed vs. First Trust LongShort | WisdomTree Managed vs. WisdomTree CBOE SP |
| First Trust vs. WisdomTree Managed Futures | First Trust vs. First Trust LongShort | First Trust vs. First Trust Alternative | First Trust vs. iMGP DBi Managed |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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