Correlation Between First Trust and VanEck Semiconductor
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Semiconductor 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 VanEck Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and VanEck Semiconductor ETF, you can compare the effects of market volatilities on First Trust and VanEck Semiconductor 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 VanEck Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Semiconductor.
Diversification Opportunities for First Trust and VanEck Semiconductor
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and VanEck is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and VanEck Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Semiconductor ETF 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 NASDAQ are associated (or correlated) with VanEck Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Semiconductor ETF has no effect on the direction of First Trust i.e., First Trust and VanEck Semiconductor go up and down completely randomly.
Pair Corralation between First Trust and VanEck Semiconductor
Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 0.74 times more return on investment than VanEck Semiconductor. However, First Trust NASDAQ is 1.35 times less risky than VanEck Semiconductor. It trades about 0.16 of its potential returns per unit of risk. VanEck Semiconductor ETF is currently generating about -0.05 per unit of risk. If you would invest 6,091 in First Trust NASDAQ on August 25, 2024 and sell it today you would earn a total of 270.00 from holding First Trust NASDAQ or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. VanEck Semiconductor ETF
Performance |
| Timeline |
| First Trust NASDAQ |
| VanEck Semiconductor ETF |
First Trust and VanEck Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Semiconductor
The main advantage of trading using opposite First Trust and VanEck Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Semiconductor 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 VanEck Semiconductor will offset losses from the drop in VanEck Semiconductor's long position.| First Trust vs. Invesco DWA Utilities | First Trust vs. Invesco Dynamic Large | First Trust vs. Invesco Dynamic Large | First Trust vs. HUMANA INC |
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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