Correlation Between First Trust and Leuthold Core

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

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

Diversification Opportunities for First Trust and Leuthold Core

0.95

Correlation Coefficient

First Trust  Leuthold Core

Almost no diversification

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

Pair Corralation between First Trust and Leuthold Core

Considering the 90-day investment horizon First Trust Dorsey is expected to generate 2.92 times more return on investment than Leuthold Core. However, First Trust is 2.92 times more volatile than Leuthold Core ETF. It trades about 0.14 of its potential returns per unit of risk. Leuthold Core ETF is currently generating about 0.11 per unit of risk. If you would invest  3,460  in First Trust Dorsey on September 13, 2024 and sell it today you would earn a total of  378.00  from holding First Trust Dorsey or generate 10.92% 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 Dorsey  vs.  Leuthold Core ETF

First Trust Dorsey

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Leuthold Core ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leuthold Core ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Leuthold Core is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Leuthold Core

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

The idea behind First Trust Dorsey and Leuthold Core ETF 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.