Correlation Between First Trust and Gabelli ETFs

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

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

Diversification Opportunities for First Trust and Gabelli ETFs

0.35

Correlation Coefficient

First Trust  Gabelli ETFs

Weak diversification

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

Pair Corralation between First Trust and Gabelli ETFs

Given the investment horizon of 90 days First Trust is expected to generate 1.2 times less return on investment than Gabelli ETFs. But when comparing it to its historical volatility, First Trust Indxx is 1.01 times less risky than Gabelli ETFs. It trades about 0.33 of its potential returns per unit of risk. Gabelli ETFs Trust is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  3,347  in Gabelli ETFs Trust on October 20, 2024 and sell it today you would earn a total of  187.00  from holding Gabelli ETFs Trust or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

First Trust Indxx  vs.  Gabelli ETFs Trust

First Trust Indxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Indxx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gabelli ETFs Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli ETFs Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli ETFs is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Gabelli ETFs

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

The idea behind First Trust Indxx and Gabelli ETFs Trust 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.