Correlation Between VanEck China and First Trust
Can any of the company-specific risk be diversified away by investing in both VanEck China 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 China 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 China Bond and First Trust SSI, you can compare the effects of market volatilities on VanEck China 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 China with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck China and First Trust.
Diversification Opportunities for VanEck China 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 China Bond and First Trust SSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SSI and VanEck China 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 China Bond 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 SSI has no effect on the direction of VanEck China i.e., VanEck China and First Trust go up and down completely randomly.
Pair Corralation between VanEck China and First Trust
Given the investment horizon of 90 days VanEck China is expected to generate 21.48 times less return on investment than First Trust. But when comparing it to its historical volatility, VanEck China Bond is 2.13 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust SSI is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,134 in First Trust SSI on September 3, 2024 and sell it today you would earn a total of 714.00 from holding First Trust SSI or generate 22.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck China Bond vs. First Trust SSI
Performance |
| Timeline |
| VanEck China Bond |
| First Trust SSI |
VanEck China and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck China and First Trust
The main advantage of trading using opposite VanEck China and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck China 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 China vs. SPDR Bloomberg Emerging | VanEck China vs. Vanguard Emerging Markets | VanEck China vs. SPDR Bloomberg Barclays | VanEck China vs. VanEck JP Morgan |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Managed | First Trust vs. First Trust TCW | First Trust vs. First Trust Senior |
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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