Correlation Between First Trust and Defiance ETFs

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

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

Diversification Opportunities for First Trust and Defiance ETFs

0.0

Correlation Coefficient

First Trust  Defiance ETFs

Pay attention - limited upside

The 3 months correlation between First and Defiance is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Defiance ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance ETFs 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 NASDAQ are associated (or correlated) with Defiance ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance ETFs has no effect on the direction of First Trust i.e., First Trust and Defiance ETFs go up and down completely randomly.

Pair Corralation between First Trust and Defiance ETFs

If you would invest  8,526  in First Trust NASDAQ on December 29, 2024 and sell it today you would lose (20.00) from holding First Trust NASDAQ or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Trust NASDAQ  vs.  Defiance ETFs

First Trust NASDAQ

Risk-Adjusted Performance

Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Defiance ETFs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defiance ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Defiance ETFs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Trust and Defiance ETFs

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

The idea behind First Trust NASDAQ and Defiance ETFs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.