Correlation Between First Trust and QQQN

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

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

Diversification Opportunities for First Trust and QQQN

0.0

Correlation Coefficient

First Trust  QQQN

Pay attention - limited upside

The 3 months correlation between First and QQQN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Equity and QQQN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QQQN 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 Equity are associated (or correlated) with QQQN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QQQN has no effect on the direction of First Trust i.e., First Trust and QQQN go up and down completely randomly.

Pair Corralation between First Trust and QQQN

If you would invest (100.00) in QQQN on December 29, 2024 and sell it today you would earn a total of  100.00  from holding QQQN or generate -100.0% return on investment over 90 days.

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

First Trust Equity  vs.  QQQN

First Trust Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

QQQN

Risk-Adjusted Performance

Very Weak

Over the last 90 days QQQN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, QQQN is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and QQQN

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

The idea behind First Trust Equity and QQQN 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.