Correlation Between First Trust and Ero Copper

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

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

Diversification Opportunities for First Trust and Ero Copper

-0.76

Correlation Coefficient

First Trust  Ero Copper

Pay attention - limited upside

The 3 months correlation between First and Ero is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp 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 Exchange Traded are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of First Trust i.e., First Trust and Ero Copper go up and down completely randomly.

Pair Corralation between First Trust and Ero Copper

Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.06 times more return on investment than Ero Copper. However, First Trust Exchange Traded is 16.86 times less risky than Ero Copper. It trades about 0.45 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.1 per unit of risk. If you would invest  1,990  in First Trust Exchange Traded on December 5, 2024 and sell it today you would earn a total of  63.00  from holding First Trust Exchange Traded or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

First Trust Exchange Traded  vs.  Ero Copper Corp

First Trust Exchange

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Ero Copper Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with First Trust and Ero Copper

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

The idea behind First Trust Exchange Traded and Ero Copper Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.