Correlation Between First Trust and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both First Trust and FlexShares Quality 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 FlexShares Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and FlexShares Quality Dividend, you can compare the effects of market volatilities on First Trust and FlexShares Quality 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 FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Quality.
Diversification Opportunities for First Trust and FlexShares Quality
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and FlexShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and FlexShares Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality 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 Value are associated (or correlated) with FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality has no effect on the direction of First Trust i.e., First Trust and FlexShares Quality go up and down completely randomly.
Pair Corralation between First Trust and FlexShares Quality
Considering the 90-day investment horizon First Trust Value is expected to generate 1.05 times more return on investment than FlexShares Quality. However, First Trust is 1.05 times more volatile than FlexShares Quality Dividend. It trades about 0.06 of its potential returns per unit of risk. FlexShares Quality Dividend is currently generating about 0.0 per unit of risk. If you would invest 4,348 in First Trust Value on December 28, 2024 and sell it today you would earn a total of 102.00 from holding First Trust Value or generate 2.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Value vs. FlexShares Quality Dividend
Performance |
Timeline |
First Trust Value |
FlexShares Quality |
First Trust and FlexShares Quality Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and FlexShares Quality
The main advantage of trading using opposite First Trust and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, FlexShares Quality 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 FlexShares Quality will offset losses from the drop in FlexShares Quality's long position.First Trust vs. First Trust Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
FlexShares Quality vs. FlexShares Quality Dividend | FlexShares Quality vs. FlexShares International Quality | FlexShares Quality vs. FlexShares International Quality |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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