Correlation Between First Trust and Technology Select

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

By analyzing existing cross correlation between First Trust NASDAQ 100 Technology and Technology Select Sector, you can compare the effects of market volatilities on First Trust and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Technology Select.

Diversification Opportunities for First Trust and Technology Select

0.0

Correlation Coefficient

First Trust  Technology Select

Pay attention - limited upside

The 3 months correlation between First and Technology is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ 100 Technol and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 100 Technology are associated (or correlated) with Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of First Trust i.e., First Trust and Technology Select go up and down completely randomly.

Pair Corralation between First Trust and Technology Select

If you would invest  22,716  in Technology Select Sector on September 29, 2024 and sell it today you would earn a total of  1,033  from holding Technology Select Sector or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.79%
Values	Daily Returns

First Trust NASDAQ 100 Technol  vs.  Technology Select Sector

First Trust NASDAQ

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days First Trust NASDAQ 100 Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Technology Select Sector

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and Technology Select

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

The idea behind First Trust NASDAQ 100 Technology and Technology Select Sector 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 Commodity Directory module to find actively traded commodities issued by global exchanges.