Correlation Between First Trust and WGRO

Can any of the company-specific risk be diversified away by investing in both First Trust and WGRO 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 WGRO 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 WGRO, you can compare the effects of market volatilities on First Trust and WGRO 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 WGRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WGRO.

Diversification Opportunities for First Trust and WGRO

0.59

Correlation Coefficient

First Trust  WGRO

Very weak diversification

The 3 months correlation between First and WGRO is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and WGRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGRO 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 WGRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGRO has no effect on the direction of First Trust i.e., First Trust and WGRO go up and down completely randomly.

Pair Corralation between First Trust and WGRO

Given the investment horizon of 90 days First Trust is expected to generate 2.62 times less return on investment than WGRO. But when comparing it to its historical volatility, First Trust Exchange Traded is 6.23 times less risky than WGRO. It trades about 0.2 of its potential returns per unit of risk. WGRO is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,982  in WGRO on September 18, 2024 and sell it today you would earn a total of  229.00  from holding WGRO or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.44%
Values	Daily Returns

First Trust Exchange Traded  vs.  WGRO

First Trust Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 8 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

WGRO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and WGRO

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

The idea behind First Trust Exchange Traded and WGRO 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.