Correlation Between Exchange Traded and First Trust

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

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

Diversification Opportunities for Exchange Traded and First Trust

-0.63

Correlation Coefficient

Exchange Traded  First Trust

Excellent diversification

The 3 months correlation between Exchange and First is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Traded Concepts and First Trust International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust International and Exchange Traded 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 Exchange Traded Concepts 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 International has no effect on the direction of Exchange Traded i.e., Exchange Traded and First Trust go up and down completely randomly.

Pair Corralation between Exchange Traded and First Trust

If you would invest  3,791  in First Trust International on April 29, 2025 and sell it today you would earn a total of  90.00  from holding First Trust International or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

Exchange Traded Concepts  vs.  First Trust International

Exchange Traded Concepts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Exchange Traded is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Trust International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Exchange Traded and First Trust

The main advantage of trading using opposite Exchange Traded and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Traded 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 Exchange Traded Concepts and First Trust International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.