Correlation Between First Trust and VanEck CEF
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck CEF 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 CEF 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 CEF Municipal, you can compare the effects of market volatilities on First Trust and VanEck CEF 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 CEF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck CEF.
Diversification Opportunities for First Trust and VanEck CEF
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and VanEck is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Municipal and VanEck CEF Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck CEF Municipal 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 CEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck CEF Municipal has no effect on the direction of First Trust i.e., First Trust and VanEck CEF go up and down completely randomly.
Pair Corralation between First Trust and VanEck CEF
Given the investment horizon of 90 days First Trust is expected to generate 1.15 times less return on investment than VanEck CEF. But when comparing it to its historical volatility, First Trust Municipal is 1.76 times less risky than VanEck CEF. It trades about 0.08 of its potential returns per unit of risk. VanEck CEF Municipal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,938 in VanEck CEF Municipal on November 19, 2024 and sell it today you would earn a total of 275.00 from holding VanEck CEF Municipal or generate 14.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Municipal vs. VanEck CEF Municipal
Performance |
| Timeline |
| First Trust Municipal |
| VanEck CEF Municipal |
First Trust and VanEck CEF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck CEF
The main advantage of trading using opposite First Trust and VanEck CEF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck CEF 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 CEF will offset losses from the drop in VanEck CEF'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 CEF vs. VanEck Long Muni | VanEck CEF vs. VanEck Short High | VanEck CEF vs. SPDR Nuveen Bloomberg | VanEck CEF vs. VanEck High Yield |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |