Correlation Between First Trust and EGSHARES BLUE

Can any of the company-specific risk be diversified away by investing in both First Trust and EGSHARES BLUE 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 EGSHARES BLUE 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 EGSHARES BLUE CHIP, you can compare the effects of market volatilities on First Trust and EGSHARES BLUE 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 EGSHARES BLUE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and EGSHARES BLUE.

Diversification Opportunities for First Trust and EGSHARES BLUE

0.93

Correlation Coefficient

First Trust  EGSHARES BLUE

Almost no diversification

The 3 months correlation between First and EGSHARES is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and EGSHARES BLUE CHIP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGSHARES BLUE CHIP 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 EGSHARES BLUE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGSHARES BLUE CHIP has no effect on the direction of First Trust i.e., First Trust and EGSHARES BLUE go up and down completely randomly.

Pair Corralation between First Trust and EGSHARES BLUE

Given the investment horizon of 90 days First Trust is expected to generate 5.11 times less return on investment than EGSHARES BLUE. But when comparing it to its historical volatility, First Trust Exchange Traded is 5.11 times less risky than EGSHARES BLUE. It trades about 0.24 of its potential returns per unit of risk. EGSHARES BLUE CHIP is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,306  in EGSHARES BLUE CHIP on August 30, 2024 and sell it today you would earn a total of  190.00  from holding EGSHARES BLUE CHIP or generate 5.75% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  EGSHARES BLUE CHIP

First Trust Exchange

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

EGSHARES BLUE CHIP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EGSHARES BLUE CHIP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, EGSHARES BLUE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Trust and EGSHARES BLUE

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

The idea behind First Trust Exchange Traded and EGSHARES BLUE CHIP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.