Correlation Between First Trust and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both First Trust and Alpha Architect 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 Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and Alpha Architect Quantitative, you can compare the effects of market volatilities on First Trust and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Alpha Architect.
Diversification Opportunities for First Trust and Alpha Architect
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Alpha is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and Alpha Architect Quantitative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Quan 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 Japan are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Quan has no effect on the direction of First Trust i.e., First Trust and Alpha Architect go up and down completely randomly.
Pair Corralation between First Trust and Alpha Architect
Considering the 90-day investment horizon First Trust Japan is expected to generate 0.84 times more return on investment than Alpha Architect. However, First Trust Japan is 1.19 times less risky than Alpha Architect. It trades about 0.01 of its potential returns per unit of risk. Alpha Architect Quantitative is currently generating about -0.04 per unit of risk. If you would invest 5,297 in First Trust Japan on February 3, 2024 and sell it today you would earn a total of 4.00 from holding First Trust Japan or generate 0.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Japan vs. Alpha Architect Quantitative
Performance |
Timeline |
First Trust Japan |
Alpha Architect Quan |
First Trust and Alpha Architect Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and Alpha Architect
The main advantage of trading using opposite First Trust and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect's long position.First Trust vs. WisdomTree Emerging Markets | First Trust vs. WisdomTree SmallCap Quality | First Trust vs. First Trust Emerging |
Alpha Architect vs. First Trust Multi | Alpha Architect vs. First Trust Small | Alpha Architect vs. First Trust Large | Alpha Architect vs. First Trust Large |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |