Correlation Between First Trust and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Oil 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 Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Nasdaq and VanEck Oil Refiners, you can compare the effects of market volatilities on First Trust and VanEck Oil 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 Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Oil.
Diversification Opportunities for First Trust and VanEck Oil
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and VanEck is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and VanEck Oil Refiners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Refiners 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 Nasdaq are associated (or correlated) with VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Refiners has no effect on the direction of First Trust i.e., First Trust and VanEck Oil go up and down completely randomly.
Pair Corralation between First Trust and VanEck Oil
Given the investment horizon of 90 days First Trust Nasdaq is expected to under-perform the VanEck Oil. In addition to that, First Trust is 1.29 times more volatile than VanEck Oil Refiners. It trades about -0.02 of its total potential returns per unit of risk. VanEck Oil Refiners is currently generating about 0.11 per unit of volatility. If you would invest 2,804 in VanEck Oil Refiners on November 9, 2024 and sell it today you would earn a total of 64.00 from holding VanEck Oil Refiners or generate 2.28% 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 Nasdaq vs. VanEck Oil Refiners
Performance |
| Timeline |
| First Trust Nasdaq |
| VanEck Oil Refiners |
First Trust and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Oil
The main advantage of trading using opposite First Trust and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Oil 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 Oil will offset losses from the drop in VanEck Oil's long position.| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq |
| VanEck Oil vs. iShares MSCI Global | VanEck Oil vs. First Trust Nasdaq | VanEck Oil vs. Invesco SP SmallCap | VanEck Oil vs. Alerian Energy Infrastructure |
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.
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