Correlation Between Utilities Select and First Trust
Can any of the company-specific risk be diversified away by investing in both Utilities Select and First Trust 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 Utilities Select and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Utilities Select Sector and First Trust Utilities, you can compare the effects of market volatilities on Utilities Select and First Trust 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 Utilities Select with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Select and First Trust.
Diversification Opportunities for Utilities Select and First Trust
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Utilities and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Select Sector and First Trust Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Utilities and Utilities Select 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 Utilities Select Sector are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Utilities has no effect on the direction of Utilities Select i.e., Utilities Select and First Trust go up and down completely randomly.
Pair Corralation between Utilities Select and First Trust
Considering the 90-day investment horizon Utilities Select is expected to generate 2.02 times less return on investment than First Trust. In addition to that, Utilities Select is 1.08 times more volatile than First Trust Utilities. It trades about 0.06 of its total potential returns per unit of risk. First Trust Utilities is currently generating about 0.13 per unit of volatility. If you would invest 3,773 in First Trust Utilities on December 28, 2024 and sell it today you would earn a total of 300.00 from holding First Trust Utilities or generate 7.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Utilities Select Sector vs. First Trust Utilities
Performance |
Timeline |
Utilities Select Sector |
First Trust Utilities |
Utilities Select and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Utilities Select and First Trust
The main advantage of trading using opposite Utilities Select and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Select position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
First Trust vs. First Trust Consumer | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Energy |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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