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
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and VanEck is -0.34. 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 generate 1.33 times more return on investment than VanEck Oil. However, First Trust is 1.33 times more volatile than VanEck Oil Refiners. It trades about 0.04 of its potential returns per unit of risk. VanEck Oil Refiners is currently generating about 0.01 per unit of risk. If you would invest 2,595 in First Trust Nasdaq on August 31, 2024 and sell it today you would earn a total of 564.60 from holding First Trust Nasdaq or generate 21.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| 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 Oil Equipment | VanEck Oil vs. Invesco Dynamic Oil | VanEck Oil vs. SPDR SP Oil | VanEck Oil vs. iShares Oil Gas |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |