Correlation Between Industrial Select and First Trust
Can any of the company-specific risk be diversified away by investing in both Industrial Select 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 Industrial Select and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and First Trust Exchange Traded, you can compare the effects of market volatilities on Industrial Select 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 Industrial Select with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and First Trust.
Diversification Opportunities for Industrial Select and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrial and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector 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 Industrial Select 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 Industrial Select Sector 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 Industrial Select i.e., Industrial Select and First Trust go up and down completely randomly.
Pair Corralation between Industrial Select and First Trust
Considering the 90-day investment horizon Industrial Select is expected to generate 1.24 times less return on investment than First Trust. In addition to that, Industrial Select is 1.18 times more volatile than First Trust Exchange Traded. It trades about 0.16 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.23 per unit of volatility. If you would invest 6,702 in First Trust Exchange Traded on August 26, 2024 and sell it today you would earn a total of 549.00 from holding First Trust Exchange Traded or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. First Trust Exchange Traded
Performance |
| Timeline |
| Industrial Select Sector |
| First Trust Exchange |
Industrial Select and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and First Trust
The main advantage of trading using opposite Industrial Select and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select 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.| Industrial Select vs. Gabelli ETFs Trust | Industrial Select vs. First Trust Exchange Traded | Industrial Select vs. Northern Lights | Industrial Select vs. First Trust Exchange Traded |
| First Trust vs. Franklin Core Dividend | First Trust vs. WisdomTree Trust | First Trust vs. Invesco SP MidCap |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |