Correlation Between First Trust and IQ Hedge

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

By analyzing existing cross correlation between First Trust Managed and IQ Hedge Multi Strategy, you can compare the effects of market volatilities on First Trust and IQ Hedge 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 IQ Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IQ Hedge.

Diversification Opportunities for First Trust and IQ Hedge

0.83

Correlation Coefficient

First Trust  IQ Hedge

Very poor diversification

The 3 months correlation between First and QAI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and IQ Hedge Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Hedge Multi 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 Managed are associated (or correlated) with IQ Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Hedge Multi has no effect on the direction of First Trust i.e., First Trust and IQ Hedge go up and down completely randomly.

Pair Corralation between First Trust and IQ Hedge

Considering the 90-day investment horizon First Trust Managed is expected to generate 2.53 times more return on investment than IQ Hedge. However, First Trust is 2.53 times more volatile than IQ Hedge Multi Strategy. It trades about 0.14 of its potential returns per unit of risk. IQ Hedge Multi Strategy is currently generating about 0.22 per unit of risk. If you would invest  4,482  in First Trust Managed on May 14, 2025 and sell it today you would earn a total of  237.50  from holding First Trust Managed or generate 5.3% return on investment over 90 days.

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

First Trust Managed  vs.  IQ Hedge Multi Strategy

First Trust Managed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Multi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi Strategy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IQ Hedge is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and IQ Hedge

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

The idea behind First Trust Managed and IQ Hedge Multi Strategy 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.