Correlation Between Trowe Price and First Trust

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

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

Diversification Opportunities for Trowe Price and First Trust

0.98

Correlation Coefficient

Trowe Price  First Trust

Almost no diversification

The 3 months correlation between Trowe and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Trowe Price Retirement and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and Trowe Price 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 Trowe Price Retirement 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 Preferred has no effect on the direction of Trowe Price i.e., Trowe Price and First Trust go up and down completely randomly.

Pair Corralation between Trowe Price and First Trust

Assuming the 90 days horizon Trowe Price Retirement is expected to generate 2.34 times more return on investment than First Trust. However, Trowe Price is 2.34 times more volatile than First Trust Preferred. It trades about 0.21 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.48 per unit of risk. If you would invest  1,834  in Trowe Price Retirement on May 3, 2025 and sell it today you would earn a total of  79.00  from holding Trowe Price Retirement or generate 4.31% return on investment over 90 days.

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

Trowe Price Retirement  vs.  First Trust Preferred

Trowe Price Retirement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trowe Price Retirement are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Trowe Price is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Preferred

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Preferred are ranked lower than 37 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Trowe Price and First Trust

The main advantage of trading using opposite Trowe Price and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trowe Price 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 Trowe Price Retirement and First Trust Preferred 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.