Correlation Between First Trust and VanEck Green
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Green 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 Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust California and VanEck Green Bond, you can compare the effects of market volatilities on First Trust and VanEck Green 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 Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Green.
Diversification Opportunities for First Trust and VanEck Green
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and VanEck is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust California and VanEck Green Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Green Bond 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 California are associated (or correlated) with VanEck Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Green Bond has no effect on the direction of First Trust i.e., First Trust and VanEck Green go up and down completely randomly.
Pair Corralation between First Trust and VanEck Green
Given the investment horizon of 90 days First Trust California is expected to generate 1.51 times more return on investment than VanEck Green. However, First Trust is 1.51 times more volatile than VanEck Green Bond. It trades about 0.05 of its potential returns per unit of risk. VanEck Green Bond is currently generating about -0.08 per unit of risk. If you would invest 4,974 in First Trust California on August 23, 2024 and sell it today you would earn a total of 19.00 from holding First Trust California or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust California vs. VanEck Green Bond
Performance |
| Timeline |
| First Trust California |
| VanEck Green Bond |
First Trust and VanEck Green Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Green
The main advantage of trading using opposite First Trust and VanEck Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Green 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 Green will offset losses from the drop in VanEck Green's long position.| First Trust vs. First Trust Municipal | First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust Managed |
| VanEck Green vs. iShares USD Green | VanEck Green vs. First Trust California | VanEck Green vs. Great Southern Bancorp | VanEck Green vs. VanEck China Bond |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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