Correlation Between First Trust and Commodities Strategy

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

By analyzing existing cross correlation between First Trust Exchange Traded and Commodities Strategy Fund, you can compare the effects of market volatilities on First Trust and Commodities Strategy 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 Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Commodities Strategy.

Diversification Opportunities for First Trust and Commodities Strategy

0.63

Correlation Coefficient

First Trust  Commodities Strategy

Poor diversification

The 3 months correlation between First and Commodities is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy 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 Exchange Traded are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of First Trust i.e., First Trust and Commodities Strategy go up and down completely randomly.

Pair Corralation between First Trust and Commodities Strategy

Given the investment horizon of 90 days First Trust is expected to generate 2.67 times less return on investment than Commodities Strategy. But when comparing it to its historical volatility, First Trust Exchange Traded is 1.98 times less risky than Commodities Strategy. It trades about 0.08 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  15,201  in Commodities Strategy Fund on August 7, 2025 and sell it today you would earn a total of  797.00  from holding Commodities Strategy Fund or generate 5.24% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  Commodities Strategy Fund

First Trust Exchange

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Commodities Strategy

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Commodities Strategy Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Commodities Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Commodities Strategy

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

The idea behind First Trust Exchange Traded and Commodities Strategy Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.