Correlation Between First Trust and IPath Bloomberg

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

By analyzing existing cross correlation between First Trust Global and iPath Bloomberg Commodity, you can compare the effects of market volatilities on First Trust and IPath Bloomberg 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 IPath Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IPath Bloomberg.

Diversification Opportunities for First Trust and IPath Bloomberg

0.97

Correlation Coefficient

First Trust  IPath Bloomberg

Almost no diversification

The 3 months correlation between First and IPath is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Global and iPath Bloomberg Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Bloomberg Commodity 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 Global are associated (or correlated) with IPath Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Bloomberg Commodity has no effect on the direction of First Trust i.e., First Trust and IPath Bloomberg go up and down completely randomly.

Pair Corralation between First Trust and IPath Bloomberg

Given the investment horizon of 90 days First Trust Global is expected to generate 0.83 times more return on investment than IPath Bloomberg. However, First Trust Global is 1.2 times less risky than IPath Bloomberg. It trades about 0.07 of its potential returns per unit of risk. iPath Bloomberg Commodity is currently generating about 0.05 per unit of risk. If you would invest  2,285  in First Trust Global on August 30, 2024 and sell it today you would earn a total of  76.00  from holding First Trust Global or generate 3.33% 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 Global  vs.  iPath Bloomberg Commodity

First Trust Global

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iPath Bloomberg Commodity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Bloomberg Commodity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, IPath Bloomberg is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and IPath Bloomberg

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

The idea behind First Trust Global and iPath Bloomberg Commodity 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 Stocks Directory module to find actively traded stocks across global markets.