Correlation Between Technology Select and First Trust
Can any of the company-specific risk be diversified away by investing in both Technology 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 Technology 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 Technology Select Sector and First Trust NASDAQ, you can compare the effects of market volatilities on Technology 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 Technology Select with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and First Trust.
Diversification Opportunities for Technology Select and First Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Technology and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and Technology 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 Technology 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 NASDAQ has no effect on the direction of Technology Select i.e., Technology Select and First Trust go up and down completely randomly.
Pair Corralation between Technology Select and First Trust
Considering the 90-day investment horizon Technology Select Sector is expected to generate 1.21 times more return on investment than First Trust. However, Technology Select is 1.21 times more volatile than First Trust NASDAQ. It trades about 0.1 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.11 per unit of risk. If you would invest 14,941 in Technology Select Sector on August 29, 2024 and sell it today you would earn a total of 8,535 from holding Technology Select Sector or generate 57.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. First Trust NASDAQ
Performance |
| Timeline |
| Technology Select Sector |
| First Trust NASDAQ |
Technology Select and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and First Trust
The main advantage of trading using opposite Technology Select and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology 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.| Technology Select vs. First Trust Exchange Traded | Technology Select vs. Ultimus Managers Trust | Technology Select vs. Horizon Kinetics Medical | Technology Select vs. Harbor Health Care |
| First Trust vs. Invesco DWA Utilities | First Trust vs. Invesco Dynamic Large | First Trust vs. Invesco Dynamic Large | First Trust vs. HUMANA INC |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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