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 Consumer, 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
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VanEck and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer 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 Consumer 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. In addition to that, VanEck Biotech is 1.49 times more volatile than First Trust Consumer. It trades about -0.12 of its total potential returns per unit of risk. First Trust Consumer is currently generating about 0.37 per unit of volatility. If you would invest 6,332 in First Trust Consumer on August 28, 2024 and sell it today you would earn a total of 498.00 from holding First Trust Consumer or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Biotech ETF vs. First Trust Consumer
Performance |
| Timeline |
| VanEck Biotech ETF |
| First Trust Consumer |
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. VanEck Pharmaceutical ETF | First Trust vs. VanEck Biotech ETF | First Trust vs. VanEck Oil Services | First Trust vs. iShares Transportation Average |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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