Correlation Between The Arbitrage and First Trust
Can any of the company-specific risk be diversified away by investing in both The Arbitrage 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 The Arbitrage and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Fund and First Trust Short, you can compare the effects of market volatilities on The Arbitrage 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 The Arbitrage with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and First Trust.
Diversification Opportunities for The Arbitrage and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between The and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and The Arbitrage 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 The Arbitrage Fund 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 Short has no effect on the direction of The Arbitrage i.e., The Arbitrage and First Trust go up and down completely randomly.
Pair Corralation between The Arbitrage and First Trust
Assuming the 90 days horizon The Arbitrage Fund is expected to generate 1.77 times more return on investment than First Trust. However, The Arbitrage is 1.77 times more volatile than First Trust Short. It trades about 0.44 of its potential returns per unit of risk. First Trust Short is currently generating about 0.5 per unit of risk. If you would invest 1,325 in The Arbitrage Fund on April 2, 2025 and sell it today you would earn a total of 15.00 from holding The Arbitrage Fund or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Arbitrage Fund vs. First Trust Short
Performance |
| Timeline |
| The Arbitrage |
| First Trust Short |
The Arbitrage and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Arbitrage and First Trust
The main advantage of trading using opposite The Arbitrage and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage 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 Arbitrage vs. Enhanced Fixed Income | The Arbitrage vs. Qs Global Equity | The Arbitrage vs. Aqr Long Short Equity | The Arbitrage vs. Ab Select Equity |
| First Trust vs. Fidelity Advisor Health | First Trust vs. Vanguard Health Care | First Trust vs. Putnam Global Health | First Trust vs. Fidelity Advisor Health |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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