Correlation Between First Trust and VanEck Vectors
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Vectors 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 Vectors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Developed and VanEck Vectors ETF, you can compare the effects of market volatilities on First Trust and VanEck Vectors 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 Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Vectors.
Diversification Opportunities for First Trust and VanEck Vectors
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and VanEck is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Developed and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors 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 Developed are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of First Trust i.e., First Trust and VanEck Vectors go up and down completely randomly.
Pair Corralation between First Trust and VanEck Vectors
Given the investment horizon of 90 days First Trust Developed is expected to under-perform the VanEck Vectors. In addition to that, First Trust is 1.3 times more volatile than VanEck Vectors ETF. It trades about -0.01 of its total potential returns per unit of risk. VanEck Vectors ETF is currently generating about 0.19 per unit of volatility. If you would invest 3,880 in VanEck Vectors ETF on September 3, 2024 and sell it today you would earn a total of 102.00 from holding VanEck Vectors ETF or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Developed vs. VanEck Vectors ETF
Performance |
| Timeline |
| First Trust Developed |
| VanEck Vectors ETF |
First Trust and VanEck Vectors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Vectors
The main advantage of trading using opposite First Trust and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Vectors 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 Vectors will offset losses from the drop in VanEck Vectors' long position.| First Trust vs. First Trust Asia | First Trust vs. First Trust United | First Trust vs. First Trust Germany | First Trust vs. First Trust Japan |
| VanEck Vectors vs. VanEck Morningstar International | VanEck Vectors vs. VanEck ETF Trust | VanEck Vectors vs. VanEck ETF Trust | VanEck Vectors vs. iShares Morningstar Mid 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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