Correlation Between First Trust and VanEck Mortgage
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Mortgage 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 Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SP and VanEck Mortgage REIT, you can compare the effects of market volatilities on First Trust and VanEck Mortgage 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 Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Mortgage.
Diversification Opportunities for First Trust and VanEck Mortgage
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and VanEck is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SP and VanEck Mortgage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Mortgage REIT 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 SP are associated (or correlated) with VanEck Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Mortgage REIT has no effect on the direction of First Trust i.e., First Trust and VanEck Mortgage go up and down completely randomly.
Pair Corralation between First Trust and VanEck Mortgage
Considering the 90-day investment horizon First Trust SP is expected to generate 1.11 times more return on investment than VanEck Mortgage. However, First Trust is 1.11 times more volatile than VanEck Mortgage REIT. It trades about 0.05 of its potential returns per unit of risk. VanEck Mortgage REIT is currently generating about 0.0 per unit of risk. If you would invest 2,925 in First Trust SP on August 26, 2024 and sell it today you would earn a total of 30.00 from holding First Trust SP or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SP vs. VanEck Mortgage REIT
Performance |
| Timeline |
| First Trust SP |
| VanEck Mortgage REIT |
First Trust and VanEck Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Mortgage
The main advantage of trading using opposite First Trust and VanEck Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Mortgage 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 Mortgage will offset losses from the drop in VanEck Mortgage's long position.| First Trust vs. Invesco Active Real | First Trust vs. First Trust Consumer | First Trust vs. First Trust Utilities | First Trust vs. iShares Residential and |
| VanEck Mortgage vs. iShares Mortgage Real | VanEck Mortgage vs. Invesco KBW Premium | VanEck Mortgage vs. VanEck BDC Income | VanEck Mortgage vs. Global X SuperDividend |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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