Correlation Between Main International and First Trust

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

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

Diversification Opportunities for Main International and First Trust

0.94

Correlation Coefficient

Main International  First Trust

Almost no diversification

The 3 months correlation between Main and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Main International ETF and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and Main International 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 Main International ETF 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 Enhanced has no effect on the direction of Main International i.e., Main International and First Trust go up and down completely randomly.

Pair Corralation between Main International and First Trust

Given the investment horizon of 90 days Main International is expected to generate 1.12 times less return on investment than First Trust. But when comparing it to its historical volatility, Main International ETF is 1.1 times less risky than First Trust. It trades about 0.26 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,870  in First Trust Enhanced on April 28, 2025 and sell it today you would earn a total of  229.00  from holding First Trust Enhanced or generate 12.25% return on investment over 90 days.

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

Main International ETF  vs.  First Trust Enhanced

Main International ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main International ETF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Main International may actually be approaching a critical reversion point that can send shares even higher in August 2025.

First Trust Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Main International and First Trust

The main advantage of trading using opposite Main International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main International 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 Main International ETF and First Trust Enhanced 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.