Correlation Between United States and First Trust
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and First Trust Exchange Traded, you can compare the effects of market volatilities on United States 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 United States with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and First Trust.
Diversification Opportunities for United States and First Trust
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and First is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and United States 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 United States Steel 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 Exchange has no effect on the direction of United States i.e., United States and First Trust go up and down completely randomly.
Pair Corralation between United States and First Trust
Taking into account the 90-day investment horizon United States Steel is expected to generate 20.76 times more return on investment than First Trust. However, United States is 20.76 times more volatile than First Trust Exchange Traded. It trades about 0.03 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.21 per unit of risk. If you would invest 2,574 in United States Steel on September 14, 2024 and sell it today you would earn a total of 726.00 from holding United States Steel or generate 28.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 40.61% |
| Values | Daily Returns |
United States Steel vs. First Trust Exchange Traded
Performance |
| Timeline |
| United States Steel |
| First Trust Exchange |
United States and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and First Trust
The main advantage of trading using opposite United States and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Fortitude Gold Corp | United States vs. New Gold | United States vs. Galiano Gold | United States vs. GoldMining |
| First Trust vs. United States Steel | First Trust vs. Alcoa Corp | First Trust vs. First Majestic Silver | First Trust vs. AngloGold Ashanti plc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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