Correlation Between First Trust and VictoryShares Multi
Can any of the company-specific risk be diversified away by investing in both First Trust and VictoryShares Multi 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 Multi 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 Multi Factor Minimum, you can compare the effects of market volatilities on First Trust and VictoryShares Multi 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 Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VictoryShares Multi.
Diversification Opportunities for First Trust and VictoryShares Multi
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and VictoryShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding First Trust California and VictoryShares Multi Factor Min in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Multi 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 Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Multi has no effect on the direction of First Trust i.e., First Trust and VictoryShares Multi go up and down completely randomly.
Pair Corralation between First Trust and VictoryShares Multi
Given the investment horizon of 90 days First Trust is expected to generate 4.96 times less return on investment than VictoryShares Multi. But when comparing it to its historical volatility, First Trust California is 2.62 times less risky than VictoryShares Multi. It trades about 0.2 of its potential returns per unit of risk. VictoryShares Multi Factor Minimum is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 4,779 in VictoryShares Multi Factor Minimum on September 1, 2024 and sell it today you would earn a total of 279.00 from holding VictoryShares Multi Factor Minimum or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust California vs. VictoryShares Multi Factor Min
Performance |
| Timeline |
| First Trust California |
| VictoryShares Multi |
First Trust and VictoryShares Multi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VictoryShares Multi
The main advantage of trading using opposite First Trust and VictoryShares Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VictoryShares Multi 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 Multi will offset losses from the drop in VictoryShares Multi'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 Multi vs. iShares Core SP | VictoryShares Multi vs. iShares Core MSCI | VictoryShares Multi vs. iShares Broad USD | VictoryShares Multi vs. iShares Core SP |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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