Correlation Between First Trust and VanEck ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck 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 VanEck ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and VanEck ETF Trust, you can compare the effects of market volatilities on First Trust and VanEck 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 VanEck ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck ETF.
Diversification Opportunities for First Trust and VanEck ETF
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck 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 Dorsey are associated (or correlated) with VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of First Trust i.e., First Trust and VanEck ETF go up and down completely randomly.
Pair Corralation between First Trust and VanEck ETF
Allowing for the 90-day total investment horizon First Trust is expected to generate 1.77 times less return on investment than VanEck ETF. In addition to that, First Trust is 1.2 times more volatile than VanEck ETF Trust. It trades about 0.12 of its total potential returns per unit of risk. VanEck ETF Trust is currently generating about 0.24 per unit of volatility. If you would invest 3,514 in VanEck ETF Trust on August 30, 2024 and sell it today you would earn a total of 196.00 from holding VanEck ETF Trust or generate 5.58% 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 Dorsey vs. VanEck ETF Trust
Performance |
| Timeline |
| First Trust Dorsey |
| VanEck ETF Trust |
First Trust and VanEck ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck ETF
The main advantage of trading using opposite First Trust and VanEck ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck 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 VanEck ETF will offset losses from the drop in VanEck ETF's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| VanEck ETF vs. VanEck Morningstar International | VanEck ETF vs. VanEck Vectors ETF | VanEck ETF vs. VanEck Morningstar Wide | VanEck ETF vs. VanEck Inflation Allocation |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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