Correlation Between EA Series and First Trust

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

By analyzing existing cross correlation between EA Series Trust and First Trust Indxx, you can compare the effects of market volatilities on EA Series 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 EA Series with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Series and First Trust.

Diversification Opportunities for EA Series and First Trust

0.8

Correlation Coefficient

EA Series  First Trust

Very poor diversification

The 3 months correlation between DRLL and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and EA Series 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 EA Series Trust 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 Indxx has no effect on the direction of EA Series i.e., EA Series and First Trust go up and down completely randomly.

Pair Corralation between EA Series and First Trust

Given the investment horizon of 90 days EA Series is expected to generate 1.76 times less return on investment than First Trust. In addition to that, EA Series is 1.29 times more volatile than First Trust Indxx. It trades about 0.16 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.35 per unit of volatility. If you would invest  3,168  in First Trust Indxx on April 30, 2025 and sell it today you would earn a total of  745.00  from holding First Trust Indxx or generate 23.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

EA Series Trust  vs.  First Trust Indxx

EA Series Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in August 2025.

First Trust Indxx

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, First Trust disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EA Series and First Trust

The main advantage of trading using opposite EA Series and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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.

The idea behind EA Series Trust and First Trust Indxx 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.