Correlation Between First Trust and VanEck Preferred
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Preferred 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 Preferred 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 Preferred Securities, you can compare the effects of market volatilities on First Trust and VanEck Preferred 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 Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Preferred.
Diversification Opportunities for First Trust and VanEck Preferred
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and VanEck is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and VanEck Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Preferred Sec 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 Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Preferred Sec has no effect on the direction of First Trust i.e., First Trust and VanEck Preferred go up and down completely randomly.
Pair Corralation between First Trust and VanEck Preferred
Given the investment horizon of 90 days First Trust Senior is expected to generate 0.1 times more return on investment than VanEck Preferred. However, First Trust Senior is 9.97 times less risky than VanEck Preferred. It trades about 0.48 of its potential returns per unit of risk. VanEck Preferred Securities is currently generating about 0.02 per unit of risk. If you would invest 4,596 in First Trust Senior on November 3, 2024 and sell it today you would earn a total of 31.00 from holding First Trust Senior or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. VanEck Preferred Securities
Performance |
| Timeline |
| First Trust Senior |
| VanEck Preferred Sec |
First Trust and VanEck Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Preferred
The main advantage of trading using opposite First Trust and VanEck Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Preferred 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 Preferred will offset losses from the drop in VanEck Preferred'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 Preferred vs. Global X SuperIncome | VanEck Preferred vs. SPDR ICE Preferred | VanEck Preferred vs. Invesco Preferred ETF | VanEck Preferred vs. Invesco Variable Rate |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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