Correlation Between VictoryShares Small and First Trust
Can any of the company-specific risk be diversified away by investing in both VictoryShares Small 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 VictoryShares Small and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VictoryShares Small Cap and First Trust SMID, you can compare the effects of market volatilities on VictoryShares Small 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 VictoryShares Small with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares Small and First Trust.
Diversification Opportunities for VictoryShares Small and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VictoryShares and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares Small Cap and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID and VictoryShares Small 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 VictoryShares Small Cap 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 SMID has no effect on the direction of VictoryShares Small i.e., VictoryShares Small and First Trust go up and down completely randomly.
Pair Corralation between VictoryShares Small and First Trust
Considering the 90-day investment horizon VictoryShares Small is expected to generate 1.06 times less return on investment than First Trust. But when comparing it to its historical volatility, VictoryShares Small Cap is 1.09 times less risky than First Trust. It trades about 0.26 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,623 in First Trust SMID on August 30, 2024 and sell it today you would earn a total of 361.00 from holding First Trust SMID or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VictoryShares Small Cap vs. First Trust SMID
Performance |
| Timeline |
| VictoryShares Small Cap |
| First Trust SMID |
VictoryShares Small and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VictoryShares Small and First Trust
The main advantage of trading using opposite VictoryShares Small and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares Small 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.| VictoryShares Small vs. VictoryShares Discovery Enhanced | VictoryShares Small vs. VictoryShares EQ Income | VictoryShares Small vs. First Trust SMID | VictoryShares Small vs. VictoryShares 500 Volatility |
| First Trust vs. First Trust Rising | First Trust vs. First Trust Equity | First Trust vs. First Trust Small | First Trust vs. VictoryShares Small Cap |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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