Correlation Between MicroSectors Solactive and First Trust
Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive 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 MicroSectors Solactive and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Solactive FANG and First Trust Large, you can compare the effects of market volatilities on MicroSectors Solactive 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 MicroSectors Solactive with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and First Trust.
Diversification Opportunities for MicroSectors Solactive and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MicroSectors and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and MicroSectors Solactive 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 MicroSectors Solactive FANG 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 Large has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and First Trust go up and down completely randomly.
Pair Corralation between MicroSectors Solactive and First Trust
Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 4.88 times more return on investment than First Trust. However, MicroSectors Solactive is 4.88 times more volatile than First Trust Large. It trades about 0.31 of its potential returns per unit of risk. First Trust Large is currently generating about 0.36 per unit of risk. If you would invest 10,049 in MicroSectors Solactive FANG on April 30, 2025 and sell it today you would earn a total of 8,952 from holding MicroSectors Solactive FANG or generate 89.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
MicroSectors Solactive FANG vs. First Trust Large
Performance |
Timeline |
MicroSectors Solactive |
First Trust Large |
MicroSectors Solactive and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MicroSectors Solactive and First Trust
The main advantage of trading using opposite MicroSectors Solactive and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive 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.MicroSectors Solactive vs. Bank of Montreal | MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. Bank of Montreal | MicroSectors Solactive vs. Direxion Daily Semiconductor |
First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Large | First Trust vs. First Trust Mid |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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