Correlation Between MicroSectors FANG and First Trust
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG 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 MicroSectors FANG and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and First Trust Tactical, you can compare the effects of market volatilities on MicroSectors FANG 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 MicroSectors FANG with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and First Trust.
Diversification Opportunities for MicroSectors FANG and First Trust
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between MicroSectors and First is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and First Trust Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Tactical and MicroSectors FANG 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 MicroSectors FANG Index 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 Tactical has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and First Trust go up and down completely randomly.
Pair Corralation between MicroSectors FANG and First Trust
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 25.67 times more return on investment than First Trust. However, MicroSectors FANG is 25.67 times more volatile than First Trust Tactical. It trades about 0.12 of its potential returns per unit of risk. First Trust Tactical is currently generating about 0.06 per unit of risk. If you would invest 1,316 in MicroSectors FANG Index on December 30, 2024 and sell it today you would earn a total of 491.00 from holding MicroSectors FANG Index or generate 37.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
MicroSectors FANG Index vs. First Trust Tactical
Performance |
Timeline |
MicroSectors FANG Index |
First Trust Tactical |
MicroSectors FANG and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MicroSectors FANG and First Trust
The main advantage of trading using opposite MicroSectors FANG and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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.MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Bank of Montreal | MicroSectors FANG vs. Direxion Daily SP |
First Trust vs. First Trust Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust TCW |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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