Correlation Between First Trust and VanEck Fallen
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Fallen 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 Fallen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and VanEck Fallen Angel, you can compare the effects of market volatilities on First Trust and VanEck Fallen 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 Fallen. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Fallen.
Diversification Opportunities for First Trust and VanEck Fallen
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and VanEck is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and VanEck Fallen Angel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Fallen Angel 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 Senior are associated (or correlated) with VanEck Fallen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Fallen Angel has no effect on the direction of First Trust i.e., First Trust and VanEck Fallen go up and down completely randomly.
Pair Corralation between First Trust and VanEck Fallen
Given the investment horizon of 90 days First Trust Senior is expected to generate 0.49 times more return on investment than VanEck Fallen. However, First Trust Senior is 2.04 times less risky than VanEck Fallen. It trades about 0.27 of its potential returns per unit of risk. VanEck Fallen Angel is currently generating about 0.02 per unit of risk. If you would invest 4,560 in First Trust Senior on August 30, 2024 and sell it today you would earn a total of 68.00 from holding First Trust Senior or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. VanEck Fallen Angel
Performance |
| Timeline |
| First Trust Senior |
| VanEck Fallen Angel |
First Trust and VanEck Fallen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Fallen
The main advantage of trading using opposite First Trust and VanEck Fallen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Fallen 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 Fallen will offset losses from the drop in VanEck Fallen's long position.| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
| VanEck Fallen vs. iShares Fallen Angels | VanEck Fallen vs. VanEck Emerging Markets | VanEck Fallen vs. First Trust Multi Asset | VanEck Fallen vs. iShares 0 5 Year |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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