Correlation Between First Trust and FlexShares Quality

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

By analyzing existing cross correlation between First Trust Emerging and FlexShares Quality Large, you can compare the effects of market volatilities on First Trust and FlexShares Quality 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 FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and FlexShares Quality.

Diversification Opportunities for First Trust and FlexShares Quality

0.91

Correlation Coefficient

First Trust  FlexShares Quality

Almost no diversification

The 3 months correlation between First and FlexShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and FlexShares Quality Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality Large 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 Emerging are associated (or correlated) with FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality Large has no effect on the direction of First Trust i.e., First Trust and FlexShares Quality go up and down completely randomly.

Pair Corralation between First Trust and FlexShares Quality

Given the investment horizon of 90 days First Trust is expected to generate 2.37 times less return on investment than FlexShares Quality. But when comparing it to its historical volatility, First Trust Emerging is 1.31 times less risky than FlexShares Quality. It trades about 0.15 of its potential returns per unit of risk. FlexShares Quality Large is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,126  in FlexShares Quality Large on July 5, 2025 and sell it today you would earn a total of  690.00  from holding FlexShares Quality Large or generate 9.68% return on investment over 90 days.

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

First Trust Emerging  vs.  FlexShares Quality Large

First Trust Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Emerging are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

FlexShares Quality Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Quality Large are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, FlexShares Quality may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with First Trust and FlexShares Quality

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

The idea behind First Trust Emerging and FlexShares Quality Large 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.

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.