Correlation Between First Trust and Dimensional ETF

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Can any of the company-specific risk be diversified away by investing in both First Trust and Dimensional ETF 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 Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Multi Manager and Dimensional ETF Trust, you can compare the effects of market volatilities on First Trust and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Dimensional ETF.

Diversification Opportunities for First Trust and Dimensional ETF

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between First and Dimensional is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi-Manager and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Multi Manager are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of First Trust i.e., First Trust and Dimensional ETF go up and down completely randomly.

Pair Corralation between First Trust and Dimensional ETF

Given the investment horizon of 90 days First Trust Multi Manager is expected to generate 1.9 times more return on investment than Dimensional ETF. However, First Trust is 1.9 times more volatile than Dimensional ETF Trust. It trades about 0.24 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.02 per unit of risk. If you would invest  1,754  in First Trust Multi Manager on November 30, 2023 and sell it today you would earn a total of  130.00  from holding First Trust Multi Manager or generate 7.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

First Trust Multi-Manager  vs.  Dimensional ETF Trust

 Performance 
       Timeline  
First Trust Multi-Manager 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Manager are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, First Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.
Dimensional ETF Trust 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dimensional ETF is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Trust and Dimensional ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Dimensional ETF

The main advantage of trading using opposite First Trust and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.
The idea behind First Trust Multi Manager and Dimensional ETF Trust 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.
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 Managers module to screen money managers from public funds and ETFs managed around the world.

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