Correlation Between WisdomTree New and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree New 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 New 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 New Economy and First Trust Dow, you can compare the effects of market volatilities on WisdomTree New 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 New with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree New and First Trust.
Diversification Opportunities for WisdomTree New and First Trust
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WisdomTree and First is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and WisdomTree New 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 New Economy 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 Dow has no effect on the direction of WisdomTree New i.e., WisdomTree New and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree New and First Trust
Given the investment horizon of 90 days WisdomTree New Economy is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree New Economy is 1.21 times less risky than First Trust. The etf trades about -0.04 of its potential returns per unit of risk. The First Trust Dow is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 22,162 in First Trust Dow on August 31, 2024 and sell it today you would earn a total of 1,995 from holding First Trust Dow or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree New Economy vs. First Trust Dow
Performance |
| Timeline |
| WisdomTree New Economy |
| First Trust Dow |
WisdomTree New and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree New and First Trust
The main advantage of trading using opposite WisdomTree New and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree New 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 New vs. South Plains Financial | WisdomTree New vs. Red River Bancshares | WisdomTree New vs. NI Holdings | WisdomTree New vs. Western New England |
| First Trust vs. First Trust Cloud | First Trust vs. iShares Expanded Tech Software | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust NASDAQ 100 Technology |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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