Correlation Between EA Series and First Trust

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

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

Diversification Opportunities for EA Series and First Trust

0.32

Correlation Coefficient

EA Series  First Trust

Weak diversification

The 3 months correlation between DRAI and First is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and First Trust Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and EA Series 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 EA Series Trust 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 Multi has no effect on the direction of EA Series i.e., EA Series and First Trust go up and down completely randomly.

Pair Corralation between EA Series and First Trust

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the First Trust. In addition to that, EA Series is 2.41 times more volatile than First Trust Multi Asset. It trades about -0.04 of its total potential returns per unit of risk. First Trust Multi Asset is currently generating about -0.03 per unit of volatility. If you would invest  1,626  in First Trust Multi Asset on September 26, 2024 and sell it today you would lose (16.00) from holding First Trust Multi Asset or give up 0.98% of portfolio value over 90 days.

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

EA Series Trust  vs.  First Trust Multi Asset

EA Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, EA Series is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with EA Series and First Trust

The main advantage of trading using opposite EA Series and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust and First Trust Multi Asset 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.