Correlation Between First Trust and EA Series

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

By analyzing existing cross correlation between First Trust NASDAQ and EA Series Trust, you can compare the effects of market volatilities on First Trust and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and EA Series.

Diversification Opportunities for First Trust and EA Series

0.44

Correlation Coefficient

First Trust  EA Series

Very weak diversification

The 3 months correlation between First and SHOC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series 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 NASDAQ are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of First Trust i.e., First Trust and EA Series go up and down completely randomly.

Pair Corralation between First Trust and EA Series

Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 0.26 times more return on investment than EA Series. However, First Trust NASDAQ is 3.86 times less risky than EA Series. It trades about 0.02 of its potential returns per unit of risk. EA Series Trust is currently generating about -0.01 per unit of risk. If you would invest  6,381  in First Trust NASDAQ on December 28, 2024 and sell it today you would earn a total of  80.00  from holding First Trust NASDAQ or generate 1.25% return on investment over 90 days.

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

First Trust NASDAQ  vs.  EA Series Trust

First Trust NASDAQ

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

EA Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EA Series is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and EA Series

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

The idea behind First Trust NASDAQ and EA Series 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..