Correlation Between Etho Climate and First Trust
Can any of the company-specific risk be diversified away by investing in both Etho Climate 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 Etho Climate and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etho Climate Leadership and First Trust Mid, you can compare the effects of market volatilities on Etho Climate 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 Etho Climate with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etho Climate and First Trust.
Diversification Opportunities for Etho Climate and First Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Etho and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Etho Climate Leadership and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Etho Climate 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 Etho Climate Leadership 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 Mid has no effect on the direction of Etho Climate i.e., Etho Climate and First Trust go up and down completely randomly.
Pair Corralation between Etho Climate and First Trust
Given the investment horizon of 90 days Etho Climate Leadership is expected to under-perform the First Trust. In addition to that, Etho Climate is 1.03 times more volatile than First Trust Mid. It trades about -0.22 of its total potential returns per unit of risk. First Trust Mid is currently generating about -0.21 per unit of volatility. If you would invest 7,321 in First Trust Mid on January 19, 2024 and sell it today you would lose (339.00) from holding First Trust Mid or give up 4.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Etho Climate Leadership vs. First Trust Mid
Performance |
| Timeline |
| Etho Climate Leadership |
| First Trust Mid |
Etho Climate and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Etho Climate and First Trust
The main advantage of trading using opposite Etho Climate and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etho Climate 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.| Etho Climate vs. Vanguard Small Cap Index | Etho Climate vs. Vanguard Large Cap Index | Etho Climate vs. Vanguard Small Cap Growth | Etho Climate vs. Vanguard Small Cap Value |
| First Trust vs. Motley Fool Global | First Trust vs. The RBB Fund | First Trust vs. Aquagold International | First Trust vs. Thrivent High Yield |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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