Correlation Between First Trust and MicroSectors Gold

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

Diversification Opportunities for First Trust and MicroSectors Gold

0.09

Correlation Coefficient

First Trust  MicroSectors Gold

Significant diversification

The 3 months correlation between First and MicroSectors is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners 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 MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of First Trust i.e., First Trust and MicroSectors Gold go up and down completely randomly.

Pair Corralation between First Trust and MicroSectors Gold

Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the MicroSectors Gold. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Exchange Traded is 7.42 times less risky than MicroSectors Gold. The etf trades about -0.02 of its potential returns per unit of risk. The MicroSectors Gold Miners is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,451  in MicroSectors Gold Miners on May 15, 2025 and sell it today you would earn a total of  3,912  from holding MicroSectors Gold Miners or generate 71.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Trust Exchange Traded  vs.  MicroSectors Gold Miners

First Trust Exchange

Risk-Adjusted Performance

Weakest

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MicroSectors Gold Miners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MicroSectors Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and MicroSectors Gold

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

The idea behind First Trust Exchange Traded and MicroSectors Gold Miners 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.