Correlation Between IQ Winslow and First Trust

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

By analyzing existing cross correlation between IQ Winslow Large and First Trust Exchange Traded, you can compare the effects of market volatilities on IQ Winslow and First Trust 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 IQ Winslow with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Winslow and First Trust.

Diversification Opportunities for IQ Winslow and First Trust

0.88

Correlation Coefficient

IQ Winslow  First Trust

Very poor diversification

The 3 months correlation between IWLG and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding IQ Winslow Large and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and IQ Winslow 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 IQ Winslow Large are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of IQ Winslow i.e., IQ Winslow and First Trust go up and down completely randomly.

Pair Corralation between IQ Winslow and First Trust

Given the investment horizon of 90 days IQ Winslow Large is expected to under-perform the First Trust. In addition to that, IQ Winslow is 3.4 times more volatile than First Trust Exchange Traded. It trades about -0.08 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about -0.07 per unit of volatility. If you would invest  3,908  in First Trust Exchange Traded on December 27, 2024 and sell it today you would lose (75.00) from holding First Trust Exchange Traded or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

IQ Winslow Large  vs.  First Trust Exchange Traded

IQ Winslow Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days IQ Winslow Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

First Trust Exchange

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IQ Winslow and First Trust

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

The idea behind IQ Winslow Large and First Trust Exchange Traded 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.