Correlation Between VanEck Biotech and First Trust
Can any of the company-specific risk be diversified away by investing in both VanEck Biotech 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 VanEck Biotech and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Biotech ETF and First Trust NYSE, you can compare the effects of market volatilities on VanEck Biotech 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 VanEck Biotech with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Biotech and First Trust.
Diversification Opportunities for VanEck Biotech and First Trust
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between VanEck and First is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and First Trust NYSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NYSE and VanEck Biotech 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 VanEck Biotech ETF 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 NYSE has no effect on the direction of VanEck Biotech i.e., VanEck Biotech and First Trust go up and down completely randomly.
Pair Corralation between VanEck Biotech and First Trust
Considering the 90-day investment horizon VanEck Biotech ETF is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Biotech ETF is 1.08 times less risky than First Trust. The etf trades about -0.2 of its potential returns per unit of risk. The First Trust NYSE is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 16,876 in First Trust NYSE on August 24, 2024 and sell it today you would lose (230.00) from holding First Trust NYSE or give up 1.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Biotech ETF vs. First Trust NYSE
Performance |
| Timeline |
| VanEck Biotech ETF |
| First Trust NYSE |
VanEck Biotech and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Biotech and First Trust
The main advantage of trading using opposite VanEck Biotech and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Biotech 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.| VanEck Biotech vs. Global X Clean | VanEck Biotech vs. Global X Renewable | VanEck Biotech vs. Global X Thematic | VanEck Biotech vs. Global X AgTech |
| First Trust vs. Global X Clean | First Trust vs. Global X Renewable | First Trust vs. Global X Thematic | First Trust vs. Global X AgTech |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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