Correlation Between First Trust and Amplify ETF

Can any of the company-specific risk be diversified away by investing in both First Trust and Amplify ETF 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 First Trust and Amplify ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust S Network and Amplify ETF Trust, you can compare the effects of market volatilities on First Trust and Amplify ETF 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 First Trust with a short position of Amplify ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Amplify ETF.

Diversification Opportunities for First Trust and Amplify ETF

0.84

Correlation Coefficient

First Trust  Amplify ETF

Very poor diversification

The 3 months correlation between First and Amplify is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and Amplify ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify ETF Trust and First Trust 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 First Trust S Network are associated (or correlated) with Amplify ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify ETF Trust has no effect on the direction of First Trust i.e., First Trust and Amplify ETF go up and down completely randomly.

Pair Corralation between First Trust and Amplify ETF

Given the investment horizon of 90 days First Trust S Network is expected to under-perform the Amplify ETF. But the etf apears to be less risky and, when comparing its historical volatility, First Trust S Network is 1.03 times less risky than Amplify ETF. The etf trades about -0.21 of its potential returns per unit of risk. The Amplify ETF Trust is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  6,899  in Amplify ETF Trust on October 7, 2024 and sell it today you would lose (257.00) from holding Amplify ETF Trust or give up 3.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

First Trust S Network  vs.  Amplify ETF Trust

First Trust S

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Amplify ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amplify ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Amplify ETF is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Amplify ETF

The main advantage of trading using opposite First Trust and Amplify ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Amplify ETF 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 Amplify ETF will offset losses from the drop in Amplify ETF's long position.

The idea behind First Trust S Network and Amplify ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.