Correlation Between First Trust and WisdomTree Emerging

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

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

Diversification Opportunities for First Trust and WisdomTree Emerging

-0.35

Correlation Coefficient

First Trust  WisdomTree Emerging

Very good diversification

The 3 months correlation between First and WisdomTree is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Tactical and WisdomTree Emerging Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging 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 Tactical are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of First Trust i.e., First Trust and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between First Trust and WisdomTree Emerging

Given the investment horizon of 90 days First Trust Tactical is expected to generate 0.63 times more return on investment than WisdomTree Emerging. However, First Trust Tactical is 1.59 times less risky than WisdomTree Emerging. It trades about 0.3 of its potential returns per unit of risk. WisdomTree Emerging Currency is currently generating about -0.05 per unit of risk. If you would invest  4,129  in First Trust Tactical on September 17, 2024 and sell it today you would earn a total of  38.00  from holding First Trust Tactical or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

First Trust Tactical  vs.  WisdomTree Emerging Currency

First Trust Tactical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Tactical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Emerging Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, WisdomTree Emerging is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and WisdomTree Emerging

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

The idea behind First Trust Tactical and WisdomTree Emerging Currency 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.