Correlation Between First Trust and IREIT MarketVector

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

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

Diversification Opportunities for First Trust and IREIT MarketVector

0.95

Correlation Coefficient

First Trust  IREIT MarketVector

Almost no diversification

The 3 months correlation between First and IREIT is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and iREIT MarketVector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iREIT MarketVector 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 Exchange Traded are associated (or correlated) with IREIT MarketVector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iREIT MarketVector has no effect on the direction of First Trust i.e., First Trust and IREIT MarketVector go up and down completely randomly.

Pair Corralation between First Trust and IREIT MarketVector

Given the investment horizon of 90 days First Trust is expected to generate 3.34 times less return on investment than IREIT MarketVector. But when comparing it to its historical volatility, First Trust Exchange Traded is 1.02 times less risky than IREIT MarketVector. It trades about 0.01 of its potential returns per unit of risk. iREIT MarketVector is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,948  in iREIT MarketVector on October 7, 2024 and sell it today you would earn a total of  62.00  from holding iREIT MarketVector or generate 3.18% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  iREIT MarketVector

First Trust Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

iREIT MarketVector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iREIT MarketVector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with First Trust and IREIT MarketVector

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

The idea behind First Trust Exchange Traded and iREIT MarketVector 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.