Correlation Between DXGE and First Trust

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

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

Diversification Opportunities for DXGE and First Trust

0.0

Correlation Coefficient

DXGE  First Trust

Pay attention - limited upside

The 3 months correlation between DXGE and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DXGE and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan and DXGE 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 DXGE 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 Japan has no effect on the direction of DXGE i.e., DXGE and First Trust go up and down completely randomly.

Pair Corralation between DXGE and First Trust

If you would invest  5,037  in First Trust Japan on December 19, 2024 and sell it today you would earn a total of  631.00  from holding First Trust Japan or generate 12.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DXGE  vs.  First Trust Japan

DXGE

Risk-Adjusted Performance

Very Weak

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

First Trust Japan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Japan are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking indicators, First Trust reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXGE and First Trust

The main advantage of trading using opposite DXGE and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXGE 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.

The idea behind DXGE and First Trust Japan 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.