Correlation Between First Trust and Virtus ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and Virtus ETF 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 Virtus ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and Virtus ETF Trust, you can compare the effects of market volatilities on First Trust and Virtus ETF 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 Virtus ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Virtus ETF.
Diversification Opportunities for First Trust and Virtus ETF
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Virtus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Virtus ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus ETF Trust 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 Enhanced are associated (or correlated) with Virtus ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus ETF Trust has no effect on the direction of First Trust i.e., First Trust and Virtus ETF go up and down completely randomly.
Pair Corralation between First Trust and Virtus ETF
Given the investment horizon of 90 days First Trust is expected to generate 3.48 times less return on investment than Virtus ETF. But when comparing it to its historical volatility, First Trust Enhanced is 13.99 times less risky than Virtus ETF. It trades about 0.51 of its potential returns per unit of risk. Virtus ETF Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,173 in Virtus ETF Trust on August 29, 2024 and sell it today you would earn a total of 25.00 from holding Virtus ETF Trust or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. Virtus ETF Trust
Performance |
| Timeline |
| First Trust Enhanced |
| Virtus ETF Trust |
First Trust and Virtus ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Virtus ETF
The main advantage of trading using opposite First Trust and Virtus ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Virtus ETF 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 Virtus ETF will offset losses from the drop in Virtus ETF's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| Virtus ETF vs. VanEck Vectors Moodys | Virtus ETF vs. BondBloxx ETF Trust | Virtus ETF vs. Vanguard ESG Corporate | Virtus ETF vs. Vanguard Intermediate Term Corporate |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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