Correlation Between First Trust and Vident International
Can any of the company-specific risk be diversified away by investing in both First Trust and Vident International 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 Vident International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and Vident International Equity, you can compare the effects of market volatilities on First Trust and Vident International 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 Vident International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vident International.
Diversification Opportunities for First Trust and Vident International
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Vident is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Vident International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident International 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 Emerging are associated (or correlated) with Vident International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident International has no effect on the direction of First Trust i.e., First Trust and Vident International go up and down completely randomly.
Pair Corralation between First Trust and Vident International
Given the investment horizon of 90 days First Trust Emerging is expected to generate 0.71 times more return on investment than Vident International. However, First Trust Emerging is 1.4 times less risky than Vident International. It trades about -0.1 of its potential returns per unit of risk. Vident International Equity is currently generating about -0.1 per unit of risk. If you would invest 2,747 in First Trust Emerging on August 28, 2024 and sell it today you would lose (42.00) from holding First Trust Emerging or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. Vident International Equity
Performance |
| Timeline |
| First Trust Emerging |
| Vident International |
First Trust and Vident International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vident International
The main advantage of trading using opposite First Trust and Vident International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vident International 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 Vident International will offset losses from the drop in Vident International's long position.| First Trust vs. First Trust SSI | First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Managed | First Trust vs. First Trust Tactical |
| Vident International vs. Vident Core Equity | Vident International vs. Vident Core Bond | Vident International vs. iShares MSCI ACWI | Vident International vs. BMO Mid Federal |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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