Correlation Between First Trust and VanEck Long
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Long 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 Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Municipal and VanEck Long Muni, you can compare the effects of market volatilities on First Trust and VanEck Long 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 Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Long.
Diversification Opportunities for First Trust and VanEck Long
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and VanEck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Municipal and VanEck Long Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Long Muni 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 Municipal are associated (or correlated) with VanEck Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Long Muni has no effect on the direction of First Trust i.e., First Trust and VanEck Long go up and down completely randomly.
Pair Corralation between First Trust and VanEck Long
Given the investment horizon of 90 days First Trust is expected to generate 1.1 times less return on investment than VanEck Long. But when comparing it to its historical volatility, First Trust Municipal is 1.35 times less risky than VanEck Long. It trades about 0.18 of its potential returns per unit of risk. VanEck Long Muni is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,774 in VanEck Long Muni on November 28, 2024 and sell it today you would earn a total of 21.00 from holding VanEck Long Muni or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Municipal vs. VanEck Long Muni
Performance |
| Timeline |
| First Trust Municipal |
| VanEck Long Muni |
First Trust and VanEck Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Long
The main advantage of trading using opposite First Trust and VanEck Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Long 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 Long will offset losses from the drop in VanEck Long's long position.| First Trust vs. SSGA Active Trust | First Trust vs. SPDR Nuveen Municipal | First Trust vs. iShares Short Maturity | First Trust vs. First Trust Flexible |
| VanEck Long vs. VanEck Intermediate Muni | VanEck Long vs. VanEck Short Muni | VanEck Long vs. Invesco National AMT Free | VanEck Long vs. SPDR Nuveen Bloomberg |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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