Correlation Between First Trust and VictoryShares USAA
Can any of the company-specific risk be diversified away by investing in both First Trust and VictoryShares USAA 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 VictoryShares USAA 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 VictoryShares USAA Core, you can compare the effects of market volatilities on First Trust and VictoryShares USAA 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 VictoryShares USAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VictoryShares USAA.
Diversification Opportunities for First Trust and VictoryShares USAA
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and VictoryShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Trust California and VictoryShares USAA Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares USAA Core 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 VictoryShares USAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares USAA Core has no effect on the direction of First Trust i.e., First Trust and VictoryShares USAA go up and down completely randomly.
Pair Corralation between First Trust and VictoryShares USAA
Given the investment horizon of 90 days First Trust California is expected to generate 0.71 times more return on investment than VictoryShares USAA. However, First Trust California is 1.42 times less risky than VictoryShares USAA. It trades about 0.2 of its potential returns per unit of risk. VictoryShares USAA Core is currently generating about 0.11 per unit of risk. If you would invest 4,961 in First Trust California on September 1, 2024 and sell it today you would earn a total of 60.00 from holding First Trust California or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust California vs. VictoryShares USAA Core
Performance |
| Timeline |
| First Trust California |
| VictoryShares USAA Core |
First Trust and VictoryShares USAA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VictoryShares USAA
The main advantage of trading using opposite First Trust and VictoryShares USAA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VictoryShares USAA 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 VictoryShares USAA will offset losses from the drop in VictoryShares USAA'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 |
| VictoryShares USAA vs. VictoryShares USAA Core | VictoryShares USAA vs. VictoryShares International Value | VictoryShares USAA vs. VictoryShares Small Mid | VictoryShares USAA vs. VictoryShares Value Momentum |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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