Correlation Between Extended Market and First Trust/confluence
Can any of the company-specific risk be diversified away by investing in both Extended Market and First Trust/confluence 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 Extended Market and First Trust/confluence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and First Trustconfluence Small, you can compare the effects of market volatilities on Extended Market and First Trust/confluence 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 Extended Market with a short position of First Trust/confluence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and First Trust/confluence.
Diversification Opportunities for Extended Market and First Trust/confluence
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and First Trustconfluence Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust/confluence and Extended Market 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 Extended Market Index are associated (or correlated) with First Trust/confluence. 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/confluence has no effect on the direction of Extended Market i.e., Extended Market and First Trust/confluence go up and down completely randomly.
Pair Corralation between Extended Market and First Trust/confluence
Assuming the 90 days horizon Extended Market Index is expected to generate 0.88 times more return on investment than First Trust/confluence. However, Extended Market Index is 1.13 times less risky than First Trust/confluence. It trades about 0.22 of its potential returns per unit of risk. First Trustconfluence Small is currently generating about 0.09 per unit of risk. If you would invest 1,908 in Extended Market Index on April 8, 2025 and sell it today you would earn a total of 183.00 from holding Extended Market Index or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. First Trustconfluence Small
Performance |
| Timeline |
| Extended Market Index |
| First Trust/confluence |
Extended Market and First Trust/confluence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and First Trust/confluence
The main advantage of trading using opposite Extended Market and First Trust/confluence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, First Trust/confluence 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/confluence will offset losses from the drop in First Trust/confluence's long position.| Extended Market vs. One Choice In | Extended Market vs. Oklahoma College Savings | Extended Market vs. Fidelity Managed Retirement | Extended Market vs. John Hancock Funds |
| First Trust/confluence vs. Nt International Small Mid | First Trust/confluence vs. Ashmore Emerging Markets | First Trust/confluence vs. Needham Small Cap | First Trust/confluence vs. Sp Smallcap 600 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |