Correlation Between First Trust and WisdomTree International

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

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

Diversification Opportunities for First Trust and WisdomTree International

0.75

Correlation Coefficient

First Trust  WisdomTree International

Poor diversification

The 3 months correlation between First and WisdomTree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer and WisdomTree International Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 Consumer are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of First Trust i.e., First Trust and WisdomTree International go up and down completely randomly.

Pair Corralation between First Trust and WisdomTree International

Considering the 90-day investment horizon First Trust Consumer is expected to generate 1.59 times more return on investment than WisdomTree International. However, First Trust is 1.59 times more volatile than WisdomTree International LargeCap. It trades about 0.14 of its potential returns per unit of risk. WisdomTree International LargeCap is currently generating about 0.13 per unit of risk. If you would invest  5,912  in First Trust Consumer on May 9, 2025 and sell it today you would earn a total of  583.00  from holding First Trust Consumer or generate 9.86% return on investment over 90 days.

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

First Trust Consumer  vs.  WisdomTree International Large

First Trust Consumer

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Consumer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

WisdomTree International

Risk-Adjusted Performance

Fair

Over the last 90 days WisdomTree International LargeCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree International is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and WisdomTree International

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

The idea behind First Trust Consumer and WisdomTree International LargeCap 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.