Correlation Between First Trust and United States

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

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

Diversification Opportunities for First Trust and United States

0.95

Correlation Coefficient

First Trust  United States

Almost no diversification

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

Pair Corralation between First Trust and United States

Given the investment horizon of 90 days First Trust is expected to generate 1.39 times less return on investment than United States. But when comparing it to its historical volatility, First Trust Global is 1.11 times less risky than United States. It trades about 0.16 of its potential returns per unit of risk. United States Commodity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,580  in United States Commodity on December 28, 2024 and sell it today you would earn a total of  553.00  from holding United States Commodity or generate 8.4% 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 Global  vs.  United States Commodity

First Trust Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

United States Commodity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Commodity are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, United States may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Trust and United States

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

The idea behind First Trust Global and United States Commodity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.