Correlation Between First Trust and Virtus Reaves
Can any of the company-specific risk be diversified away by investing in both First Trust and Virtus Reaves 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 Reaves into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Utilities and Virtus Reaves Utilities, you can compare the effects of market volatilities on First Trust and Virtus Reaves 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 Reaves. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Virtus Reaves.
Diversification Opportunities for First Trust and Virtus Reaves
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Virtus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Utilities and Virtus Reaves Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Reaves Utilities 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 Utilities are associated (or correlated) with Virtus Reaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Reaves Utilities has no effect on the direction of First Trust i.e., First Trust and Virtus Reaves go up and down completely randomly.
Pair Corralation between First Trust and Virtus Reaves
Considering the 90-day investment horizon First Trust is expected to generate 1.16 times less return on investment than Virtus Reaves. But when comparing it to its historical volatility, First Trust Utilities is 1.57 times less risky than Virtus Reaves. It trades about 0.28 of its potential returns per unit of risk. Virtus Reaves Utilities is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,516 in Virtus Reaves Utilities on August 29, 2024 and sell it today you would earn a total of 493.00 from holding Virtus Reaves Utilities or generate 7.57% 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 Utilities vs. Virtus Reaves Utilities
Performance |
| Timeline |
| First Trust Utilities |
| Virtus Reaves Utilities |
First Trust and Virtus Reaves Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Virtus Reaves
The main advantage of trading using opposite First Trust and Virtus Reaves positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Virtus Reaves 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 Reaves will offset losses from the drop in Virtus Reaves' long position.| First Trust vs. Global X CleanTech | First Trust vs. Global X Clean | First Trust vs. Global X Wind | First Trust vs. Global X Thematic |
| Virtus Reaves vs. Global X CleanTech | Virtus Reaves vs. Global X Clean | Virtus Reaves vs. Global X Wind | Virtus Reaves vs. Global X Thematic |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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