Correlation Between Royce Quant and First Trust
Can any of the company-specific risk be diversified away by investing in both Royce Quant 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 Royce Quant and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Quant Small Cap and First Trust Equity, you can compare the effects of market volatilities on Royce Quant 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 Royce Quant with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Quant and First Trust.
Diversification Opportunities for Royce Quant and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Royce and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Royce Quant Small Cap and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity and Royce Quant 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 Royce Quant Small Cap 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 Equity has no effect on the direction of Royce Quant i.e., Royce Quant and First Trust go up and down completely randomly.
Pair Corralation between Royce Quant and First Trust
Given the investment horizon of 90 days Royce Quant is expected to generate 1.57 times less return on investment than First Trust. In addition to that, Royce Quant is 1.05 times more volatile than First Trust Equity. It trades about 0.01 of its total potential returns per unit of risk. First Trust Equity is currently generating about 0.02 per unit of volatility. If you would invest 3,254 in First Trust Equity on March 24, 2025 and sell it today you would earn a total of 25.00 from holding First Trust Equity or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royce Quant Small Cap vs. First Trust Equity
Performance |
| Timeline |
| Royce Quant Small |
| First Trust Equity |
Royce Quant and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royce Quant and First Trust
The main advantage of trading using opposite Royce Quant and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Quant 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.| Royce Quant vs. First Trust Equity | Royce Quant vs. ClearBridge Dividend Strategy | Royce Quant vs. Principal Quality ETF |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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