Correlation Between Precious Metals and First Trust

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

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

Diversification Opportunities for Precious Metals and First Trust

0.21

Correlation Coefficient

Precious Metals  First Trust

Modest diversification

The 3 months correlation between PRECIOUS and First is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Precious Metals 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 Precious Metals Ultrasector 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 Managed has no effect on the direction of Precious Metals i.e., Precious Metals and First Trust go up and down completely randomly.

Pair Corralation between Precious Metals and First Trust

Assuming the 90 days horizon Precious Metals Ultrasector is expected to generate 21.68 times more return on investment than First Trust. However, Precious Metals is 21.68 times more volatile than First Trust Managed. It trades about 0.22 of its potential returns per unit of risk. First Trust Managed is currently generating about 0.06 per unit of risk. If you would invest  6,985  in Precious Metals Ultrasector on May 16, 2025 and sell it today you would earn a total of  3,116  from holding Precious Metals Ultrasector or generate 44.61% return on investment over 90 days.

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

Precious Metals Ultrasector  vs.  First Trust Managed

Precious Metals Ultr

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals Ultrasector are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Precious Metals showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Managed

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Precious Metals and First Trust

The main advantage of trading using opposite Precious Metals and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals 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 Precious Metals Ultrasector and First Trust Managed 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.